Proposed Merger Enforcement Guidelines

November 13, 2025

The Bureau held a public consultation on proposed Merger Enforcement Guidelines from November 13, 2025 to February 11, 2026. Submissions received through the consultation have been published on the Written responses to the Public consultation on proposed Merger Enforcement Guidelines webpage.

The Bureau is reviewing these draft guidelines and making adjustments or corrections as necessary. The Bureau will publish updated guidelines once they are finalized, at which point they will replace the current Merger Enforcement Guidelines, dated October 6, 2011.

For a PDF copy of the guidelines, please send a request to cbmegspdf-bcldfpdf@cb-bc.gc.ca.

Preface

  1. The Competition Bureau is an independent law enforcement agency that protects and promotes competition for the benefit of Canadian consumers and businesses. We investigate anti-competitive practices and promote compliance with the laws we enforce, including the Competition Act (“Act”).Footnote 1 We are headed by the Commissioner of Competition (“Commissioner”).
  2. We are an investigative and enforcement agency. We have issued these guidelines to provide general direction on our analytical approach in merger investigations. They replace the previous Merger Enforcement Guidelines and statements made by the Commissioner or other Competition Bureau officials. These guidelines are written in plain language for ease of use. They are not exhaustive of all topics, and may address some issues differently than prior guidance. Readers should not draw any conclusions based on differences from past guidelines.
  3. We also publish other guidance about the merger review process:
    1. Procedures Guide for Notifiable Transactions and Advance Ruling Certificates Under the Competition Act;
    2. Merger Review Process Guidelines;
    3. Fees and Service Standards Handbook for Mergers and Merger-Related Matters; and
    4. Information Bulletin on Merger Remedies in Canada.
  4. We also publish guidelines in other areas, such as the Anti-competitive Conduct and Agreements Guidelines. Different guidelines may provide different levels of detail about certain issues, and readers should not draw any conclusions based on differences from other guidance.

    We are also developing the Cartel Enforcement Guidelines, which will be published at a later time. In anticipation, these guidelines include placeholder references to the Cartel Enforcement Guidelines. Until the Cartel Enforcement Guidelines are released, continue to refer to the Competitor Collaboration Guidelines for information about section 45 of the Act.

  5. This is not a legal document. It is intended to provide general information and is provided for convenience. To learn more, please refer to the full text of the Act or contact us. We encourage merging parties to contact us early to discuss proposed transactions. Merging parties should obtain appropriate legal advice when considering a merger.
  6. Final interpretation of the law is the responsibility of the Competition Tribunal (“Tribunal”) and the courts. These guidelines do not replace legal advice. They are not intended to restate the law. Nor are they a binding statement of how the Commissioner will proceed in specific matters. The decisions of the Commissioner and the ultimate resolution of issues will depend on the situation.

Table of contents

1 Introduction

  1. Competition is a dynamic process of rivalry. When firms compete, they are driven to innovate by developing new or better products, and pressured to deliver products at lower prices or on better terms. Rivalry among firms can provide important benefits to Canadians, including:
    1. competitive prices;
    2. higher quality products;
    3. more innovation;
    4. more choices; and
    5. greater economic growth.
  2. Merger review is the first line of defence to protect competition. It can prevent consolidation that would lessen rivalry and deny Canadians the benefits of competition. It also helps prevent the concentration of market power that can lead to other types of anti-competitive behaviour. Effective merger review safeguards the competitive process and helps to promote a competitive Canadian marketplace.
  3. These guidelines describe how we carry out merger review under the Act.Footnote 2 They describe, to the extent possible, how we analyze mergers. Because merger law applies to a wide variety of factual situations, we do not apply these guidelines rigidly. That being said, they reflect legal and economic principles that we consider generally applicable, even as the features and characteristics of specific industries are taken into account.
  4. This document is not a binding statement of how our analysis is carried out in any particular case. The specific facts of a case, as well as the nature of the information and evidence available, determine how we assess a transaction and may sometimes require methodologies other than those noted here.
  5. In all our reviews, our focus is identifying whether the merger is likely to lead to a greater ability to exercise market power. Market power represents the ability to profitably influence dimensions of competition, such as the price and quality of products. Mergers that create, enhance or maintain market power are likely to raise concerns under the merger provisions of the Act.
  6. When our analysis under these guidelines reveals that a merger is likely to result in substantial harm to competition, we act to preserve or restore competition in accordance with the Act. Most merger transactions do not raise competition concerns, and some have important benefits. Our priority is to quickly identify mergers that may substantially harm competition, and to allow those that are unlikely to substantially harm competition to proceed.
  7. The Act presumes that mergers that exceed certain market share and concentration thresholds harm competition substantially, or are likely to do so.Footnote 3 These thresholds are outlined in Part 4.2.2.1 of these guidelines. We will closely examine mergers that appear to exceed the thresholds. Parties who engage in such transactions should be prepared to present evidence refuting the presumption. Mergers that do not meet these thresholds may also be found to substantially harm competition under the Act.
  8. Our mandate includes reviewing mergers of all sizes, in all industries, to protect and promote competition in Canada. The parties to some mergers that exceed financial thresholds (“notifiable transactions”) must notify the Commissioner and provide certain information before closing their merger. But we also review mergers that are not subject to these requirements.Footnote 4 We can review proposed mergers as well as mergers that have already closed.
  9. The mergers we review include:
    1. Horizontal mergers, which involve parties that directly compete. Horizontal mergers can include mergers of competing sellers of products and mergers of competing buyers.
    2. Non-horizontal mergers, which involve parties that do not directly compete. Non-horizontal mergers can include vertical mergers, between customers and suppliers, and conglomerate mergers, between firms offering products that are otherwise related.
  10. Some mergers may include both horizontal and non-horizontal elements. All these types of mergers have the potential to substantially harm competition in Canada.
  11. We generally start our review of a merger by considering whether there are markets in which both parties compete or could compete. A merger may harm competition if it lessens or prevents rivalry between the merging parties. We also consider whether the parties operate in the same or competing supply chains, or whether they supply related products. In these cases, a merger may harm competition if it provides the ability or incentive to weaken the rivals of one or both of the merging parties. Mergers may also harm competition in other ways, as discussed in these guidelines.
  12. When we conduct our reviews, we typically gather information from a number of sources, including the merging parties, their customers and competitors, and other industry stakeholders. Parties to notifiable transactions are required by law to supply certain information. We may ask the merging parties or other stakeholders for documents, written explanations, or data. We can also advance our investigations by seeking court orders to obtain records or written returns of information from businesses or individuals, or to question them under oath.Footnote 5
  13. We face significant timing pressures when we review mergers. There are limitation periods imposed by law that restrict our ability to challenge mergers that have been substantially completed for more than three years and in some cases as little as one year.Footnote 6 We try to complete our reviews as quickly as possible, and we try to identify early the mergers that could substantially harm competition.
  14. Whether a merger is a notifiable transaction or not, we will typically engage with the merging parties during our investigation and give them the opportunity to supply relevant evidence, arguments, and information. We also publish the mergers we review on our websiteFootnote 7, and we invite stakeholders and members of the public to give us information on mergers that we are reviewing or could review.
  15. Merger review is often an inherently predictive exercise in which we evaluate a merger’s effects on future competition. Under the Act, we investigate whether a merger is likely to lessen or prevent competition substantially. This test requires more than mere possibilities. However, the assessment does not require certainty, and we may not predict the precise effects of a merger under review. We analyze mergers based on the available evidence and consider all factors relevant to assessing market power.
  16. If we determine that a proposed merger is likely to substantially harm competition, we can apply to the Tribunal to preserve the level of competition that would have existed without the merger.Footnote 8 If we conclude that a completed merger has substantially harmed competition, we can apply to the Tribunal to restore competition to the level that would have existed without the merger.Footnote 9 Where appropriate, we may agree to a consensual resolution with the merging parties in order to preserve or restore competition.Footnote 10 This resolution is usually a consent agreement that is registered with the Tribunal and has the force of an order. In some cases, we may ask the Tribunal for an interim order to prevent parties from closing a potentially harmful merger while we complete our inquiry, or before the merger is assessed by the Tribunal.
  17. The Tribunal is a specialized tribunal with expertise in economics, business and law. They make decisions and issue orders under certain provisions of the Act. They can order parties not to proceed with all or part of a merger. They can also make interim orders requiring parties not to proceed with a merger pending the outcome of a merger challenge. Firms must comply with Tribunal orders. We cannot make orders ourselves.

1.1 Using these guidelines

  1. These guidelines provide general guidance on how we assess mergers under the Act. Depending on the merger, only some parts of these guidelines may apply, or we may focus on certain aspects more than others. We encourage readers to review the parts that are relevant to them.
  2. Here is how these guidelines are organized:
    1. Part 1 – Introduction – Introduces the guidelines and how we approach merger review under the Act.
    2. Part 2 – What is a reviewable merger? – Describes the types of transactions or other arrangements that we review. It also describes how we determine whether the merger provisions of the Act apply to a transaction or arrangement. If the merger provisions do not apply, a transaction or arrangement may still be investigated under other provisions of the Act.Footnote 11
    3. Part 3 – When does a merger harm competition? – Explains what market power is. It also describes the harm to competition that can be addressed under the merger provisions (a substantial lessening or prevention of competition). When we conclude that a merger has substantially lessened or prevented competition, or is likely to do so, we come to a consensual resolution with the parties or we can apply to the Tribunal to restore or preserve competition.
    4. Part 4 – How we assess harm to competition – Explains how we assess mergers to determine whether they are likely to substantially harm competition.
      1. 4.1 – Overview – Outlines our analytical process. It describes the role of market structure in our analysis, how we apply the structural presumptions in subsection 92(2) of the Act, and how we assess the likely competitive effects of a merger. It also discusses the evidence and information that we rely on in our reviews.
      2. 4.2 – Market structure – Describes our analysis of market structure. It outlines how we define markets, and how we assess market share and concentration in those markets. It also discusses the thresholds for a significant increase in market share or concentration that may lead to a presumption of substantial harm to competition.
      3. 4.3 – Minority interests – Explains how we account for minority interests, such as when a firm holds a direct ownership interest in a competitor, in our reviews.
      4. 4.4 – Anti-competitive effects of mergers – Describes our analysis of the likely competitive effects of a merger. It also outlines frameworks we may use to assess these effects, depending on the type of merger and the features of the affected markets. For example, it discusses our assessment of mergers between competitors; non-horizontal mergers; innovation and dynamic competition; coordinated effects; and platforms and multi-sided markets. The frameworks described are non-exhaustive and we may use multiple frameworks in a single review.
      5. 4.5-4.7 – Entry, failing firms and exiting assets, and pro-competitive benefits – Describes certain countervailing factors that we may consider when our analysis indicates that a merger is otherwise likely to substantially harm competition.
    5. Appendix A – Analysis of control and significant interest – Describes our analysis of “control” and “significant interest” under the Act. This may be relevant when we are determining whether a transaction or arrangement can be reviewed under the merger provisions (Part 2) or when we are assessing the impact of minority interests (Part 4.3).
    6. Appendix B – The merger provisions of the Act – Sets out the provisions of the Act that we enforce.

2 What is a reviewable merger?

  1. As described in section 91 of the Act, a “merger” is the acquisition or establishment of control over, or a significant interest in, all or a part of another’s business. This includes any way that control or a significant interest may be established or acquired, such as one or more firms buying another firm’s shares or assets, or multiple firms coming together through amalgamation or combination.
  2. We may review any merger or acquisition, regardless of size, to protect and promote competition. The parties to some mergers (“notifiable transactions”) are required by law to notify the Commissioner and provide certain information before closing their merger.Footnote 12
  3. A merger must involve the whole or part of a business to be reviewed under section 92 of the Act. However, “business” is defined broadly in subsection 2(1) of the Act and a firm can have a business even if its activities are under development or otherwise nascent.
  4. The definition of merger includes both mergers of firms that supply competing products (horizontal mergers), and mergers of firms that do not directly compete (non-horizontal mergers, including those addressed in Part 4.4.2). A merger may also have both horizontal and non-horizontal features, as described in Part 4.4 of these guidelines.
  5. The parties to a transaction that results in a merger can include individuals and entities. An entity means a corporation or a partnership, sole proprietorship, trust, or other unincorporated organization capable of conducting business.

2.1 Control and significant interest

  1. A merger can arise from the acquisition of “control” of a business. Control is defined in subsection 2(4) of the Act. In general, “control” means having a majority interest (that is, an interest of greater than 50 percent).
  2. A merger can also arise from the acquisition of a “significant interest” in another business. In considering whether an interest in the whole or a part of a business is "significant", we consider the nature and impact, both qualitative and quantitative, of the acquisition or establishment of the interest. We assess whether the person acquiring or establishing the interest (the “acquirer”) gains the ability to materially influence the competitive behaviour of the target business or the incentive to materially change its own competitive behaviour as a result of acquiring or establishing that interest.Footnote 13 Competitive behaviour includes but is not limited to decisions relating to pricing, production, purchasing, distribution, marketing, employment, investment, financing, joint ventures and partnerships, mergers and acquisitions, and the licensing of intellectual property rights.
  3. Control or a significant interest may be acquired or established through:
    1. Acquisitions of shares or other interests: To determine whether a particular shareholding or interest gives the holder material influence, we analyse the relationship between the acquirer and the target business. We also analyse the various ways the acquirer might exercise influence. We consider the quantitative and qualitative nature of the interest held, including voting rights and other conditions attached to the interest. This is described further in Appendix A: Analysis of control and significant interest.
    2. Acquisitions of assets: The purchase or lease of an unincorporated division, plant, distribution facility, retail outlet, brand name or intellectual property or contractual rights from a target company can be a merger. We treat the acquisition of any of these essential assets, in whole or in part, as the acquisition or establishment of a significant interest in that business. Acquiring a subset of the assets of a business that is capable of being used to carry on a separate business is also considered to be the acquisition or establishment of a significant interest in the business.
    3. Amalgamation or combination: Forming a new business through the amalgamation or combination of existing firms or their assets can be a merger.
    4. Other types of contracts or agreements: A significant interest can be acquired or established under shareholder agreements, management contracts, franchise agreements and other contractual arrangements involving corporations, partnerships, joint ventures, combinations and other entities, depending on the terms of the arrangements. In addition, loan, supply, and distribution arrangements that are not ordinary-course transactions may be mergers where they result in the ability to materially influence the competitive behaviour of the target business.Footnote 14
  4. A merger may also include multiple parts or steps. These could involve acquisitions of both shares and assets, or acquisitions pursuant to separate agreements. In some circumstances where an acquirer engages in a series of transactions we may examine all or part of the series as a merger, even if each is not individually notifiable.Footnote 15
  5. When considering whether acquiring or establishing a significant interest constitutes a merger, we analyse :
    1. the relationship between the parties before the transaction or event that establishes the interest;
    2. the likely subsequent relationship between the parties;
    3. the access that an acquirer has and obtains to confidential business information of the target business, and vice versa; and
    4. evidence of the acquirer's intentions to affect the behaviour of that business or change its own behaviour.
  6. Further detail on our approach to assessing whether a transaction results in the establishment or acquisition of control or a significant interest can be found in Appendix A: Analysis of control and significant interest.

3 When does a merger harm competition?

  1. As set out in subsection 92(1) of the Act, the Tribunal may make an order when it finds that a merger or proposed merger “prevents or lessens, or is likely to prevent or lessen, competition substantially.” In these guidelines, we sometimes call this a finding that a merger “substantially harms competition.”
  2. A merger substantially harms competition only when it is likely to create, maintain or enhance an ability to exercise market power.
  3. Market power represents a firm’s ability to profitably influence dimensions of competition, such as the price and quality of products. The more market power a firm has, the more it can act independently of market forces. Market power may also include the ability to influence the competitive process, such as by raising entry barriers for rivals.
  4. Firms generally have more market power when they face fewer effective competitive constraints. A merger can substantially harm competition by reducing these competitive constraints. This can include eliminating competition between two rivals that merge.
  5. We assess market power with respect to every dimension of competition that matters to market participants. This includes price, quality, product choice, service, innovation, advertising, working conditions, and privacy. We may be concerned that a merger will lead to an ability to increase price. We may also be concerned the merger will lead to an ability to decrease quality, reduce innovative activity, or influence other non-price dimensions of competition, including in situations where products do not have a monetary price. To simplify the discussion, we sometimes use the word “price” in these guidelines to refer to all dimensions of competition that matter to market participants. Unless otherwise indicated, the analyses that we discuss in these guidelines with regard to price also generally apply to non-price dimensions of competition.

3.1 Types of market power

  1. In these guidelines, we often discuss the market power of a seller of a product or service. When price is the relevant dimension of competition, a seller with market power is able to profitably raise prices for a significant period of time. What matters is the ability to raise prices, not whether an actual price increase is likely.
  2. We are also concerned with buyer market power. A buyer with market power is able, for example, to profitably lower prices sellers receive for their products for a significant period of time.
  3. Regardless of the merged firm’s role in the market, we are concerned with market power that involves limiting access to the use of any product, service, set of customers, route to market, or data, or otherwise harming the competitive process.
  4. We analyse two types of exercises of market power: unilateral and coordinated.
  5. If an exercise of market power is unilateral, it means the merged firm is able to sustain higher prices or lower quality without relying on accommodating responses from competitors. In other words, it is profitable to raise prices or lower quality even when competitors do not change their strategies to align with that of the merged firm.
  6. In contrast, a coordinated exercise of market power relies on coordination with competitors. The merged firm is able to profitably sustain raised prices or lower quality because of accommodating responses from other competitors. In other words, it is profitable to raise prices or lower quality because competitors also change their strategies to align with that of the merged firm. Mergers can make coordination easier or more effective, for example by removing a disruptive competitor or making coordination easier among remaining firms.
  7. The same merger may involve both a unilateral and a coordinated exercise of market power. Parts 4.4.1.1 and 4.4.1.2 of these guidelines explain unilateral and coordinated exercises of market power in greater detail.
  8. When a merger is not likely to affect the ability to exercise market power, it is generally not possible to demonstrate that the transaction will likely substantially harm competition, even though the merger might have implications for other policy objectives that are beyond the scope of the Act.

3.2 Substantial lessening or prevention of competition

  1. Under section 92 of the Act, we consider two types of situations: mergers that prevent competition, and mergers that lessen competition. A merger that lessens competition lowers the existing level of competition in the market. A merger that prevents competition hinders the development of future competition. In both cases, we assess whether the merged entity has materially greater market power than it would have had without the merger.
  2. When we analyse the competitive effects of a merger, we compare the level of competition after the merger to the level that would exist if the merger had not been proposed. This is a forward-looking and relative analysis. This involves considering the conditions that would have likely existed but for, or without, the merger.
  3. These will often be the same as the situation pre-merger, but we may also consider changes that would likely take place in the absence of the merger. For example, we may consider conditions that may be different from the pre-merger situation in “prevention of competition” cases, where we assess whether the level of competition in the market was likely to increase if the merger had not been proposed.

Substantiality

  1. When we assess whether a merger is likely to prevent or lessen competition substantially, we evaluate whether the merger is likely to provide the merged firm, unilaterally or in coordination with other firms, with the ability to materially influence dimensions of competition that matter to market participants. We consider the magnitude and duration of any such effect that is likely to follow from the merger.
  2. A merger may lessen or prevent competition without doing so substantially. Generally speaking, the prevention or lessening of competition is considered “substantial” where a firm is able to exercise materially more market power than it could without the merger (for example, this is generally the case when the firm’s price for the relevant product(s) would likely be materially higher in the relevant market than it would be if the merger had not been proposed) (“material effect”). When assessing non-price effects, we consider whether levels of service, quality, variety, innovation, or other non-price dimensions are likely to be materially lower than in the absence of the merger.
  3. We do not consider a numerical threshold for a material effect.Footnote 16 Instead, we base our conclusions about whether the prevention or lessening of competition is substantial on an assessment of market-specific factors that could constrain the effect after the merger.
  4. We consider the effect of a merger on both static and dynamic competition. Static competition focusses on market outcomes, such as prices, at a given point in time. Dynamic competition involves rivalry over time based on investments or innovation. We take special care to protect dynamic competition, since it is critical to improving the lives of Canadians over time.
  5. Some mergers may entrench the position of firms that already have a leading position or market power in a market. Mergers that preserve or entrench incumbents’ existing market power and hinder the introduction of new entrants, products or competitive constraints can also substantially harm competition. By reducing the potential for future competitive disruptions, a merger can increase the likelihood that incumbents can exercise market power.
  6. We will consider whether a merger entrenches the position of incumbent firms, for example by increasing barriers to entry or otherwise harming the competitive process. Mergers that entrench the position of leading firms can increase the likelihood that those firms maintain or extend the ability to exercise market power, either individually or collectively. This can be the case even when the specific effects of a future competitive disruption cannot yet be measured, or some market participants benefit in the short term.
  7. Consistent with case law under the Act, the more market power that firms have, individually or collectively, the smaller the effect that will be considered substantial. Where firms have significant market power or have entrenched their competitive position, even a merger that has a small effect on their market power may substantially harm competition. As a result, where a firm engages in a series of acquisitions in the same market, each subsequent acquisition may be more likely to result in a substantial lessening or prevention of competition.

Lessening of competition

  1. A merger may substantially lessen competition if the merger lowers the existing level of competition in a market, resulting in a greater ability to exercise market power. This can occur when the merged firm, either unilaterally or in coordination with other firms, is able to maintain higher prices or lower quality. This may happen, for example, in horizontal mergers when there is competitive overlap between the merged firms’ businesses. Even products or firms that do not currently have sales in the market can exert competitive pressure on existing competitors in the present. Competition can also be lessened by non-horizontal mergers. For example, this can occur when a merged firm can prevent competitors from buying necessary inputs to their products.

Prevention of competition

  1. A merger may substantially prevent competition if it hinders the development of anticipated future competition. This sometimes happens when there is no or limited direct overlap between the merging firms' existing businesses, but direct competition between those businesses was expected to develop or increase in the absence of the merger. It may also happen when there is direct overlap between the merging parties' businesses and one of the merging firms was expected to become a more effective competitor, for example by introducing an improved product.
  2. We may consider prevention of competition when the acquirer, target, or a potential competitor is less likely to enter or expand in the market because of the merger. We will also consider prevention of competition if a merger removes independent control of capacity or an asset that was likely to provide a competitive constraint in the market. Examples of mergers that may substantially prevent competition include:
    1. the acquisition of a potential entrant or of a recent entrant that was likely to expand or become a more vigorous competitor;
    2. the acquisition of a business by an acquirer who was developing its own competing product and was likely to enter or expand in the same market;
    3. the acquisition of a potential entrant by another potential entrant where both were likely to enter or expand in the same market;
    4. an acquisition by the market leader that pre-empts a likely acquisition of the same target by another firm, including a competitor;
    5. the acquisition of an existing business that would likely have entered the market in the absence of the merger;
    6. an acquisition that prevents expansion into new geographic markets;
    7. an acquisition that prevents or limits the introduction of new products;
    8. an acquisition that prevents the pro-competitive effects associated with new capacity; and
    9. an acquisition that prevents entry by lessening competition for the supply of an input that is important to entrants, or results in incumbents controlling inputs required by a prospective entrant.Footnote 17
  3. When assessing whether a merger has prevented, or is likely to prevent entry by one of the merging parties, we assess whether that entry would have been likely and would have had a substantial effect on competition in the market.Footnote 18 In assessing whether entry would have been likely, we consider whether it would have happened within a reasonable period of time, given the characteristics and dynamics of the market in question. This includes considering the role and importance of dynamic rivalry in the market.Footnote 19 Evidence of the potential entrant’s ability and incentives to enter, including any evidence of the potential entrant’s assets and plans, is relevant. We may also consider evidence that incumbents viewed the potential entrant as a likely competitive threat. However, our analysis is not limited to the documented plans of the potential entrant before the merger. If entry would have been likely, we consider whether this entry would have had a substantial effect impact on competition in the market.

4 How we assess harm to competition

4.1 Overview of our analysis

  1. When we review a merger, we examine whether it is likely to create, maintain or enhance market power as described in Part 3.
  2. This usually involves defining one or more relevant markets, and assessing a merger’s effects on the ability to exercise market power in those markets. Defining markets sets the context for our assessment, and it identifies the areas of actual or potential competition that may be affected. It also allows us to examine market structure. Part 4.2.1 describes how we define markets.
  3. When we take enforcement action, we typically identify markets in which competition is likely to be harmed. In some reviews, however, we may not precisely define markets, because we are able to assess the merger’s effects on competition without doing so.
  4. Generally, as part of our assessment, we:
    1. examine market structure (including market share and concentration) and how it will likely change due to the merger; and
    2. assess the overall competitive effects of the merger based on additional factors described in these guidelines.

Market structure and presumptions of harm

  1. In most reviews, we examine market structure as part of our assessment. In these guidelines, “market structure” refers to the set of competitors in a market and their relative competitive importance. We can evaluate market structure using measures of market share and concentration.
  2. “Market share” is the portion or percentage of the market that a supplier or purchaser represents. “Concentration” is a measure of the number and relative size of participants in a market. A market is more concentrated when fewer competitors make up a larger share.
  3. Mergers often change the structure of a market by removing a competitor.Footnote 20 Examining the increase in market share or concentration from the merger, and the market structure that results, can provide important information about likely effects on competition.
  4. The Act reflects that, all else being equal, mergers that result in a significant increase in, or higher levels of, concentration or market share are more likely to substantially harm competition. Under subsection 92(2) of the Act, mergers that result, or are likely to result, in a significant increase in concentration or market share are presumed to substantially harm competition, unless the contrary is proven on a balance of probabilities. Subsection 92(3) of the Act sets out thresholds for this significant increase.
  5. Where we find that a merger likely meets these thresholds, as outlined in Part 4.2.2.1 of these guidelines, we presume that it is likely to substantially harm competition.Footnote 21 However, this presumption may be refuted when other evidence proves that the merger will not likely substantially harm competition.Footnote 22 The more the thresholds are exceeded, the greater the need for persuasive evidence to refute the presumption of substantial harm in our overall analysis. This is because the structural analysis suggests a greater risk of substantial unilateral, coordinated or other competitive effects.
  6. Market definition and the measurement of market share and concentration are analytical tools we use to assist in evaluating market power and the potential for competitive harm. When a merger does not meet the thresholds in Part 4.2.2.1, we may still find that it is likely to substantially harm competition based on other analyses under these guidelines. When a merger does exceed the thresholds, we may ultimately find that it is not likely to substantially harm competition.

Assessment of anti-competitive effects

  1. The ultimate inquiry is about whether a merger prevents or lessens competition substantially, or is likely to do so.
  2. Part 4.4 of these guidelines describes frameworks we use to assess the effects of a merger on competition. Parts 4.5 to 4.7 outline certain countervailing factors that we may consider in the analysis.
  3. Section 93 of the Act sets out a non-exhaustive list of discretionary factors that the Tribunal may consider when determining whether a merger substantially harms competition.Footnote 23 These factors, which are largely qualitative, are discussed throughout Parts 4.4 to 4.7 of these guidelines.Footnote 24
  4. Using the frameworks in Part 4.4, we may conclude that a merger will likely harm competition substantially without precisely defining markets or assessing market structure. In some cases, other evidence and analyses will be sufficient. Or it may be clear that anti-competitive effects would result under all plausible market definitions. In other cases, it may be clear that a merger will not likely harm competition substantially under any plausible market definition. Merger review is often an iterative process in which evidence respecting the relevant market and market shares is considered alongside other evidence of competitive effects, with the analysis of each informing and complementing the other.
  5. When it is clear that the level of competition that will remain in the relevant market is not likely to be materially reduced as a result of the merger, that alone generally justifies a conclusion not to challenge the merger.
  6. We may assess a merger’s likely effects on one or more dimensions of competition as part of our analysis. These dimensions can reflect the intensity of rivalry between or among competitors in a market. They may include price, levels of service, quality, privacy, or innovation, among others. Where a completed merger has already caused anti-competitive effects, we may rely on evidence of those effects along with other factors. At the same time, the assessment of competitive effects is not simply a quantitative exercise nor limited to any single dimension of competition. It must be considered together with the nature of competition before and after the merger, as well as all quantitative and qualitative evidence. We examine all factors relevant to assessing market power, with their relevance and weight varying according to the case and factual context.

Evidence and information

  1. We use both qualitative and quantitative evidence to assess the effects of a merger. Qualitative evidence may come from documents created by the merging parties or other market participants in the ordinary course of business. Qualitative evidence may also come from first-hand observations of the industry by customers or other market participants. Quantitative evidence may include statistical analyses of price, quantity, costs or other data maintained by the merging parties and/or third parties. Neither qualitative nor quantitative evidence is considered in isolation. In all cases, we assess how reliable, robust and probative the evidence is.
  2. The tools we use to assess competitive effects will depend heavily on the facts of each case and on the qualitative and quantitative evidence that is available. We may assess competitive effects from a quantitative perspective using various economic tools. We adapt quantitative techniques to the industry setting, and we consider quantitative results together with other information. We have discretion in determining which economic and other analytical tools to use in each case. Our approach evolves as the economic tools evolve.

4.2 Market structure

  1. Market structure refers to the set of competitors in a market and their relative competitive importance. When we assess market structure, we generally:
    1. define the relevant markets; and
    2. calculate measures of market share and concentration in those markets.

4.2.1 Market definition

4.2.1.1 Overview
  1. A relevant market is generally made up of the close substitutes for a product.Footnote 25 The word “product” includes all types of goods, articles and services.Footnote 26 Market definition is the process of determining what products, and in which geographic areas, are those close substitutes. Parts 4.2.1.3 and 4.2.1.4 describe the product and geographic dimensions of the analysis, respectively.
  2. Market definition is an analytical tool that we often use to help us assess market structure and potential harm to competition. The most important constraints on a merging firm’s market power usually come from within the relevant market.Footnote 27 Once we have defined the relevant market, we can calculate market shares and concentration. Those measures are more informative when the market is not defined too broadly, or too narrowly.
  3. How market participants think about markets is an important factor that we will consider. However, we may define markets in a different way than businesses or customers think about them. This is because we define markets in a specific legal and analytical context, which may put weight on different considerations.
  4. We may define markets for either selling or buying products:
    1. When we assess whether a merger would harm competition among sellers (monopoly power), we focus on what customers would buy and where they would buy it from in response to an increase in price, a decrease in quality, or some other exercise of market power.
    2. When we assess whether a merger would harm competition among buyers (monopsony power), including buyers of labour, we focus on what suppliers would do in response to an exercise of market power. Examples are a decrease in price or other worsening of the terms of trade of the product. This involves examining what other buyers suppliers would likely sell to, where those buyers are, or how suppliers would likely change or reposition their products.
  5. For brevity, we focus our discussion in these guidelines on defining markets for selling products.Footnote 28
  6. Market definition is based on substitutability. It generally focuses on how demand for a product responds to changes in the relative prices of substitute products. The ability of a firm or group of firms to raise prices without losing sufficient sales to make the price increase unprofitable depends on buyers’ willingness to pay the higher price.Footnote 29 While the potential responses of competitors are also important to understanding the ability of a firm or group of firms to exercise market power, we consider supply responses at later stages of our analysis.Footnote 30
  7. We often assess industries where products are differentiated in terms of characteristics or location. Products that are differentiated have important differences between them. Market definition involves drawing a boundary between closer and more distant substitutes. This may be challenging to do with precision. In many cases it is not necessary to establish precise market boundaries, and it may not always be possible to do so. Further, not all products that buyers view as close substitutes will necessarily be part of the relevant market. Some products within the relevant market may be closer substitutes than others, and constraints from both inside and outside the market may be relevant to assessing potential competitive harm.
  8. We sometimes begin our analysis by identifying points at which products start to differ significantly, and considering major obstacles to product or geographic substitution by buyers. This may involve, for example, assessing which products have a similar end use, are similarly priced, have comparable performance, meet key technical requirements, or are interoperable or compatible with relevant systems. When defining markets around the locations of suppliers, such as retailers, we may start by considering obstacles to travel, or relevant geographic boundaries, like commuting areas.Footnote 31 This can help us initially identify the broadest possible set of relevant substitutes. But it is often not sufficient to precisely define the relevant market.Footnote 32
  9. We generally do not assume that the merging parties operate in the same relevant market(s) solely because there appears to be some overlap between their businesses. However, where there is evidence of material competition between the merging parties, or material customer diversion between their products, we will generally define a market that includes them both for our analysis.
  10. In some cases, the merging parties compete across multiple markets that share the same or similar competitive conditions. Where this occurs, we may consider multiple relevant markets in aggregate, or together, because it is simpler and does not change the analysis.Footnote 33
4.2.1.2 The hypothetical monopolist test
  1. The hypothetical monopolist test is an analytical technique that can help us define markets.
  2. We most often use the hypothetical monopolist test as a conceptual framework to help us evaluate other evidence we have gathered. In more limited cases, we may carry out the test directly using data and quantitative techniques.Footnote 34
  3. The hypothetical monopolist test defines a market as the smallest set of productsFootnote 35, and the smallest geographic area, in which a single firm controlling all products within the market (i.e., a hypothetical monopolist) would find it profit-maximizing to exercise a degree of additional of market power that is:
    1. small but significant; and
    2. non-transitory.
  4. This exercise of market power may be a small but significant and non-transitory increase in price (a “SSNIP”). Depending on the nature of competition, we may assess whether a different exercise of market power would be profit-maximizing, such as a change in product quality, variety, privacy, or any other dimension of competition.Footnote 36
  5. If we are assessing a change in price, we usually consider a five-percent price increase to be significant and a one-year period to be non-transitory. Market characteristics may support using a different price increase or time period as a SSNIP.
  6. The hypothetical monopolist test is an iterative exercise that is applied to both the product and geographic dimensions of the candidate market, though we discuss these dimensions separately in this part of the guidelines for simplicity.Footnote 37 The exercise starts with an initial candidate market made up of a product offered by at least one of the merging parties. The test asks whether a hypothetical monopolist controlling all products in the candidate market would impose a SSNIP above the base price, assuming the terms of sale of all other products remain the same.Footnote 38 If the hypothetical monopolist would do so, the test suggests this is the relevant market.
  7. If the price increase, or other exercise of market power, would cause buyers to switch their purchases to other products in sufficient quantities to make the exercise unprofitable for the hypothetical monopolistFootnote 39, the next-best substitute is added to the candidate market and the test is repeated.Footnote 40
  8. The same general approach applies in assessing the geographic scope of the market. The initial candidate market consists of a location where at least one of the merging parties produces or supplies the relevant products. If buyers are likely to switch their purchases to sellers in more distant locations in quantities sufficient to make a SSNIP, or other exercise of market power, unprofitable for the hypothetical monopolist, the location that is the next-best substitute is added to the candidate market. This process continues until the smallest area over which a hypothetical monopolist would impose and sustain the price increase is identified.
  9. The base price is typically the prevailing price in the relevant market. We may use a different base price when market conditions absent the merger would likely result in a lower or higher price in the future.Footnote 41 For example, this may be relevant when we assess whether a merger is likely to prevent future competition or result in the entrenchment of the market position of leading incumbents.
  10. In general, the base price is whatever is ordinarily considered to be the price of the product in the sector of the industry being examined.Footnote 42 For example, this may be the price at the manufacturing, wholesale, or retail level.
  11. We may use variations on the hypothetical monopolist test depending on the nature of the market and product. For example, if we are defining a market for the purchase of a product, we may use a hypothetical monopsonist test. This would involve asking if it would be profit-maximizing for a single buyer to impose a small but significant and non-transitory price decrease, or other exercise of market power, in a candidate market. Parts 4.2.1.5-4.2.1.7 of these guidelines explain how we apply the hypothetical monopolist test in other special settings.
4.2.1.3 Product dimension
  1. The product dimension of a market is generally made up of the close substitutes for a product supplied by a merging party.
  2. To identify those substitutes, we often assess product characteristics and buyers’ ability or willingness to switch from one product to another in response to changes in relative prices or a different dimension of competition.Footnote 43
  3. We usually consider qualitative indicators of substitutability and other evidence. This can include:
    1. Views, strategies, behaviours and identity of buyers: Information about whether buyers have switched between products in the past, or are likely to do so in the future, can help identify substitution patterns. We may also take into account differences between buyers that can influence their decisions when defining markets. For example, lower income consumers may see different products as substitutes than higher income consumers, or there may be differences between genders.Footnote 44
    2. Trade views, strategies and behaviours of other market participants: We may consider industry surveys, information from industry participants (such as competitors or suppliers), or the opinions of industry experts. These can provide details on the past and future behaviour of consumers and competitors. We may consider, for example, whether they suggest buyer substitution between products, or close competition between suppliers of certain products. Documents prepared in the ordinary course of business by industry participants, including the merging parties, can be especially helpful.
    3. End use: In many cases, two products must be functionally interchangeable to be substitutes.Footnote 45
    4. Physical and technical characteristics: Generally, the more that buyers value unique physical or technical characteristics of a product, the more we are likely to define markets based on those characteristics.
    5. Price relationships and relative price levels: If the price of two or more products do not move together over a significant period of time, this can suggest the products are not close substitutes.Footnote 46
    6. Switching costs: Switching costs may discourage buyers from substituting to other products. They can be monetary, or take other forms like inconvenience, time, effort or cognitive load (mental effort). For example, they can include costs for buyers related to:
      1. the time and effort to search for new options;
      2. inconvenience or perceived inconvenience of switching;
      3. changing production processes;
      4. repackaging products;
      5. testing products;
      6. adapting marketing;
      7. terminating contracts;
      8. learning new procedures or converting equipment;
      9. transferring data (including the loss of data); and
      10. other risks associated with a product change, such as risks of production shutdowns or damage to the buyer’s reputation.
  4. Statistical measures can be useful when detailed data on prices and quantities are available. For example, demand elasticities measure how buyers change their consumption of a product in response to changes in the product’s price (own-price elasticity) or in response to changes in the price of another identified product (cross-price elasticity). While cross-price elasticities do not directly measure the ability of a firm to profitably raise prices, they are particularly useful when determining whether differentiated products are close substitutes for one another and whether they are part of the same relevant market.
4.2.1.4 Geographic dimension
  1. The geographic dimension of a market is generally made up of all supply points that buyers see as close substitutes. To identify those supply points, we often assess buyers’ ability or willingness to switch from one location to another in response to changes in relative prices or a different dimension of competition.
  2. As with the product dimension, we usually consider qualitative indicators of substitutability and other evidence. This can include:
    1. Transportation costs, price levels and shipment patterns: Transportation costs are often among the most important factors when defining the geographic dimension of a market. Buyers are less likely to substitute to purchasing from other areas when transportation costs are higher. These costs include the monetary costs of transport like fuel. But they can also include factors like time, convenience, or risks from travel. Shipment patterns or differences in price levels can be an indicator of how important transportation costs are.
    2. Views, strategies, behaviours and identity of buyers: Information about whether buyers have switched between geographic areas in the past, or are likely to do so in the future, can help identify substitution patterns. Factors like the fragility or perishability of the product, convenience, and the frequency or reliability of service or delivery can affect substitution. Cultural or linguistic factors can also be relevant.
    3. Trade views, strategies and behaviours of other market participants: Industry surveys, information from industry participants (such as competitors or suppliers), or the opinions of industry experts can provide helpful information. These can provide details on the past and future behaviour of consumers and competitors. We may consider, for example, whether they suggest buyer substitution between locations, or close competition between suppliers in certain locations. Documents prepared in the regular course of business by industry participants, including the merging parties, can be especially helpful.
    4. Switching costs: Switching costs may discourage buyers from substituting between geographic areas. They can be costs in money, but can also include costs from time, effort or inconvenience.
  3. We may consider statistical measures like demand elasticities when detailed data is available.
  4. The geographic dimension of a market can include territory outside of Canada.Footnote 47 We apply the same general approach when considering if this is the case. However, we may also take into account additional factors like:
    1. tariffs or duties;
    2. quotas;
    3. regulations;
    4. industry-imposed standards;
    5. government procurement policies;
    6. intellectual property laws;
    7. changes in exchange rates; and
    8. international product standardization.
  5. Some of these factors may also be relevant when we assess whether the geographic dimension of a market includes multiple provinces. For example, regulatory requirements or government procurement policies may differ between provinces.
4.2.1.5 Price discrimination and market definition
  1. In some cases, sellers can charge different prices to different sets of customers. This is called price discrimination. It is possible when the targeted customers cannot effectively switch to other products or locations, and cannot engage in arbitrage with other buyers in sufficient quantities.
  2. Where price discrimination is possible, we may define a relevant market for a targeted set of buyers. We do this because the competitive effects of a merger may vary for different buyers based on their available alternatives. We may delineate the set of buyers based on their characteristics or their location.
  3. If we use the hypothetical monopolist test, a relevant market is then defined as the smallest group of products, and geographic area, in which a hypothetical monopolist would find it profit-maximizing to impose a SSNIP for a set of targeted buyers.
  4. In some circumstances, the set of targeted buyers may be quite small. For example, one common scenario involves buyers who face different pricing based on their location and what sellers know about their transportation cost to access competitors.Footnote 48 In these cases, we may define markets according to the location of buyers. However, we will often consider groups of these markets in aggregate in our analysis, where the buyers in each face roughly similar competitive conditions (see paragraph 86).
4.2.1.6 Platforms and multi-sided markets
  1. There may be special considerations when we assess multi-sided platforms.
  2. Multi-sided platforms provide services to two (or more) user groups and manage interactions between them. A platform “operator” provides the core services to connect participants and controls access, monetization and other aspects of the platform. For a platform, demand may be affected by network effects.
  3. Network effects exist when a product’s demand depends on the use of the product by others. They can be direct or indirect:
    1. Direct network effects exist when a product becomes more valuable as more people use it. An example would be a social network where the more people use it, the more each user can connect with others.
    2. Indirect network effects exist when the more one group uses a product, the more value this creates for another group. For example, in an online marketplace, more buyers attract more sellers, and more sellers attract more buyers. Buyers may not benefit directly from more buyers, but they benefit indirectly if having more buyers leads to more sellers joining the platform. Indirect network effects are a key element of multi-sided platforms.
  4. We may define a market for each side of a multi-sided platform. However, we may consider how an exercise of market power on one side affects demand and profit across the platform. If we use the hypothetical monopolist test, we may consider whether it would be profit maximizing to impose a SSNIP (or some other exercise of market power) on one side while accounting for the interdependence of demand, feedback effects, and changes in profit over the platform.
  5. The particular features of multi-sided platforms, including indirect network effects, may lead operators to offer services on one side at zero price. We may focus our assessment on changes in non-price dimensions, like quality or privacy, where they are important to competition. In such cases, qualitative indicators of substitutability may be particularly important.
  6. In appropriate cases, we may also define a market that includes multiple sides of a platform or we may consider multiple sides in aggregate. For example, we may do this when competitive conditions are similar for user groups on all sides (see paragraph 86).
4.2.1.7 Bundles and complements
  1. In some cases, the merging parties supply products that are purchased or sold as a group. This may be because purchasing from a single seller lowers transaction costs or otherwise benefits buyers.Footnote 49 Sellers may offer multiple products that are complementaryFootnote 50 or operate interdependently with each other.
  2. In these cases, we may sometimes define a market that includes a group of diverse products that are not substitutes for each other.Footnote 51
  3. If considering the hypothetical monopolist test, the test would be satisfied for the group of products when enough buyers would not respond to a price increase by purchasing the various components separately from different sellers. This may be the case when there are significant transaction or other costs, including a perceived reduction in quality, that would result from purchasing the goods from multiple sellers.
  4. When we assess whether products that are not substitutes should be included in the market we may consider whether they are, for example:
    1. usually sold and purchased together;
    2. sold at a bundled price;
    3. produced together;
    4. produced by the same firms; and
    5. used in fixed or variable proportions to each other.
  5. Other factors we may consider include the degree of interoperability among products, technological links and complementarity, network effects across products, or other customer switching costs. For example, a customer may use various services that are part of a single digital ecosystem because those services work better together. We may assess evidence regarding buyers’ willingness to break up their purchases, or the degree to which they “multi-home” or are likely to do so in response to a price increase (or other exercise of market power).

4.2.2 Increases in market share and concentration

4.2.2.1 Market share and concentration thresholds
  1. Under the Act, mergers are presumed to substantially harm competition when they result or are likely to result in a significant increase in concentration or market share. “Market share” is the portion or percentage of the market that a supplier or purchaser represents. “Concentration” is a measure of the number and relative size of participants in a market. A market is more concentrated when fewer competitors make up a larger share.
Market share and concentration thresholds under subsection 92(3) of the Act
  1. As defined in the Act, a significant increase occurs in a relevant market when:
    1. the concentration index increases or is likely to increase by more than 100; and
    2. either
      1. the concentration index is or is likely to be more than 1,800, or
      2. the market share of the parties to the merger or proposed merger is or is likely to be more than 30 percent.Footnote 52
  1. The same thresholds are applied to the market shares of suppliers and customers in a relevant market.Footnote 53
  2. The thresholds relate to both market shares and concentration. We assess concentration by calculating the concentration index, which is defined by the Act as the sum of the squares of the market shares in the relevant market.Footnote 54 For example, in a market where five competitors each hold a 20 percent share, the concentration index would be 2,000 (i.e., 202 + 202 + 202 + 202 + 202). The concentration index takes into account how many competitors are in a market and how large they are. The index is larger when there are fewer firms, or when firms have larger market shares. It ranges from near zero to 10,000. It is near zero where there is a very large number of small firms. It is 10,000 where there is a monopoly.
  3. When we assess market structure during our reviews, we apply these thresholds. A merger or proposed merger that exceeds them is presumed to substantially harm competition. The presumption can be refuted where other evidence proves that the merger would not in fact likely create, maintain or enhance market power and thereby substantially harm competition. Mergers that do not meet the thresholds may also be investigated and found to substantially harm competition under the Act.
  4. Mergers often increase concentration by bringing two competing firms under common control. When two competitors merge, the change in the concentration index equals twice the product of the shares of the merging parties. For example, if a firm with 30 percent market share before the merger acquires a competitor with a 2 percent share, the change in the index is 120 (i.e., 30 x 2 x 2). Mergers can also increase concentration in other ways, such as when a non-horizontal merger results in the weakening of rivals or leads to them exiting a market.
  5. We may adjust our assessment of market share and concentration to account for minority interests, as described in Part 4.3.
  6. Market structure is often a key indicator of market power and of the relative significance of competitors. When the merging firms have significant market shares, this can indicate that they face fewer or less effective competitive constraints. However, market structure can understate or overstate market power. When other information suggests that market share or concentration data do not reflect the competitive role of market participants, this may be relevant to whether a presumption of substantial harm is refuted, or the merger is ultimately found to substantially harm competition.
  7. It may be relevant to examine the extent to which market shares have changed or remained the same over a significant period of time. The nature of the market and the impact of change and innovation on the stability of existing market shares may also be relevant. For example, in bidding markets we may consider whether historical market share data reflects each competitor’s likely influence on future tenders. In markets where firms regularly develop new technologies and “leapfrog” their competitors, market shares may be less indicative of durable market power. On the other hand, durable and stable market shares may suggest competition is limited, including because of potential coordination between competitors.
4.2.2.2 Calculating market share and concentration
  1. To assess market share and concentration, we start by calculating a share for each competitor in the relevant market.Footnote 55
  2. Market shares can be measured in various ways. Our goal is to use the best measure of the current and future significance of competitors. Depending on the industry and circumstances, this can be dollar sales, unit sales, capacity,Footnote 56 reserves, measures of use or engagement (e.g., active users, time spent, page views, click-through rates, number of transactions), measures of hiring or employment, measures of business won through auctions, or other metrics. The measurement we use may also depend on the data that is available.
  3. The specific measures will depend on the case, but may include:
    1. Revenues or unit sales: This is usually where we start our analysis, including when products are differentiated. However, the more products are differentiated, the more the two measures may provide different results. In some cases, unit sales may provide important information about relative market positions, such as when discount sellers have a large competitive impact.Footnote 57
    2. Capacity to produce or sell: We often consider capacityFootnote 58 when firms’ ability to expand output is important to their ability to constrain an exercise of market power, especially when products are homogenous.Footnote 59
    3. Measures of use, attention or engagement: Measures like the number of users or the amount of time a service is used can provide helpful information in some cases. For example, they may be useful when a service is provided for free.
  4. When products are homogenous and firms are operating at full capacity, shares of dollar sales, unit sales and capacity are generally the same. When firms have excess capacity, or products are differentiated, market share measures may differ.Footnote 60
  5. When a regulated or incumbent firm is facing deregulation or growing competition, shares based on new customer acquisitions, or more recent sales, may better indicate competitive impact than shares based on existing customers.
  6. Information that is readily observable or available to the public may be useful for estimating market shares. However, we may use transaction-level data from individual market participants as the most accurate measure of market shares where it is necessary and the data are reasonably obtainable.

4.3 Minority interests

  1. Minority interests occur when one market participant holds an interest in another that does not reach the level of control.
  2. We generally consider minority interests in two circumstances:
    1. We may review the acquisition or establishment of a minority interest or an interlocking directorate as a merger.Footnote 61 This is possible when the interest is sufficient to meet the definition of merger in the Act (as discussed in Part 2).
    2. Other minority interests or interlocking directorates may be relevant to a merger already under review. For example one of the merging parties may already hold a minority stake in a third competitor. We consider both:
      1. common ownership, which occurs when the same investor or group of investors holds stakes in two or more competing firms; and
      2. cross-ownership, which occurs when one firm holds a direct ownership interest in a competitor, such as owning shares in a rival firm.Footnote 62
  3. When we consider a minority interest or interlocking directorate under these guidelines, we usually follow a two-step approach to assess its impact on competition.
    1. Step 1 – Preliminary screening: First, we usually conduct our analysis as if the interest were a full merger between the firms involved. This helps us identify cases that are unlikely to raise competition concerns. If we find that there would not likely be substantial harm to competition under this approach, we usually do not analyse the minority interest or interlock any further.Footnote 63
    2. Step 2 – Detailed assessment: If the preliminary screening suggests there could be substantial harm to competition, we then move to a more detailed analysis. At this stage, we look closely at the specific nature and impact of the minority interest or interlocking directorate. We also assess how it would likely affect competition in the market.
  4. We may adjust our assessment of market shares and concentration to account for minority interests or interlocking directorates in the relevant market. We may also assess minority interests under the frameworks in Part 4.4.
  5. A minority interest or interlocking directorate can affect competition by influencing the pricing decisions or other competitive incentives of the interest holder, the target firm, or both.
  6. When evaluating a minority interest or interlocking directorate, we consider whether it could change how the interest holder competes. For example, if a firm holds a minority interest in a competitor, it may have less incentive to compete aggressively. This may be the case even if the interest holder does not have a significant interest, or the ability to influence the target’s business. If the interest holder raises its price and loses some sales, it may continue to benefit financially from sales that are diverted to the target firm in which it has an interest. In this case, the interest holder recaptures part of the loss. This may give it more incentive to raise prices than it would have without the minority interest. In our analysis, we look at how closely the interest holder’s and target’s products compete, the extent to which sales are diverted between them, how profitable those sales are and how likely and significant the change in the interest holder’s incentives would be.
  7. We look at whether the interest holder or interlocked director could influence the target business’s behaviour, especially in ways that may reduce how aggressively it competes. We consider how much influence the interest holder or interlocked director has, and how likely it is that the exercise of that influence will prevent or lessen competition. Our general framework for the assessment of significant interest is described in Appendix A: Analysis of control and significant interest.
  8. We also consider whether the interest gives the interest holder or the firm with the interlocked director access to confidential information about the target business. We examine whether this access could make it easier for firms to coordinate their behaviour, might influence the way the receiving firm competes on its own, or both.

4.4 Anti-competitive effects of mergers

  1. Parts 4.4.1 to 4.4.3 describe frameworks we use to assess whether a merger is likely to substantially lessen or prevent competition by creating, maintaining or enhancing firms’ ability to exercise market power. Using these frameworks, we may determine that a merger will likely harm competition substantially without concluding that the thresholds in Part 4.2.2.1 of these guidelines are exceeded. Where the thresholds are exceeded, we may assess evidence that merging parties provide to refute a presumption of substantial harm to competition within these frameworks.
  2. Harm to competition can occur in different ways, including through unilateral and coordinated effects. Harm can result from a merger between direct competitors (horizontal merger), or where firms gain an interest in key inputs, customers, related products or strategic assets (such as through a non-horizontal merger). The frameworks described in this part of the guidelines are not exhaustive and we may apply aspects of multiple frameworks in a single review.
  3. To determine whether a merger is likely to substantially lessen or prevent competition, we assess the competitive constraints that limit firms’ ability to exercise market power, or that may do so in the future. We also assess how these constraints may be weakened, removed, or changed by the merger. This assessment may include quantitative and qualitative analysis and consideration of relevant factors under section 93 of the Act.
  4. To evaluate rivalry between firms, we often look first at how they currently compete. This includes examining pricing strategies, discounting, marketing and branding, product positioning and distribution, service offerings, quality and innovation. We may consider how firms’ strategies are affected by particular rivals, or how specific competitive initiatives have affected rivals. We may assess the extent of product or other differentiation among firms, and how closely certain rivals compete as a result.Footnote 64 We may also consider whether market shares have been stable or have fluctuated, and whether the market is trending towards concentration.
  5. We assess the remaining competitors in the market, and their effectiveness in constraining an exercise of market power.Footnote 65 We also consider whether they are likely to remain as vigorous and effective after the merger. For example, this may include looking at their independence from the merging firms, financial strength, ability to attract customers, access to key customers or inputs, capacity to expand, and ability to adapt or invest in response to market changes. Where relevant, we also look at the extent and quality of excess capacity in the market and who controls it.Footnote 66 If rivals can easily expand production, it may be easier for them to constrain the merged firm’s ability to exercise market power. But if the merged firm holds a significant share of the excess capacity, this may discourage rivals from expanding.
  6. We assess whether the merger would remove a vigorous and effective competitor.Footnote 67 A firm that is a vigorous and effective competitor often plays an important role in pressuring other firms to compete more intensely with existing products, or in the development of new products. A firm does not have to be among the larger competitors in a market to be a vigorous and effective competitor. Small firms can exercise an influence on competition that is large relative to their size.Footnote 68
  7. As part of this assessment, we also consider whether one of the merging parties:
    1. has a history of resisting price increases or has led price cuts in the market;
    2. offers unique services, warranties, or other terms that set it apart from competitors;
    3. has recently expanded its capacity or plans to do so;
    4. has been gaining market share or is well positioned to grow; or
    5. has recently acquired or developed intellectual property or other inputs, like relevant data – or developed product features – that enhance its ability to compete, or that are likely to do so soon.
  8. Removing a vigorous and effective competitor through a merger is likely to lessen or prevent competition. However, where there is evidence that one of the merging firms is not a vigorous or effective competitor – for example, because it is financially struggling or operating with declining or outdated technology – we may consider this as part of our analysis.
  9. We may assess whether the merger would contribute to the entrenchment of the market position of leading incumbents, including the merging parties.Footnote 69 For example, this may occur where the merger increases barriers to entry or expansion, or otherwise harms the competitive process, such that there is a greater likelihood that leading firms will maintain the ability to individually or collectively exercise market power.
  10. We may also consider the general nature and extent of change and innovation in a market.Footnote 70 This includes assessing dynamic competition and whether a merger is likely to affect the pace of innovation or the conditions that support it, such as ease of entry or access to key inputs or technologies. We apply the framework in Part 4.4.1.3 to evaluate the impacts of a merger on innovation. In some cases, change and innovation create competitive pressures that may affect the ability of the merged firm to exercise market power. For example, this may be the case where technological developments make it easier for new firms to enter or grow.
  11. We also consider whether buyers are likely to constrain an exercise of market power, for example through self-supply or by sponsoring entry. Self-supply is when buyers can credibly bypass the merged entity by vertically integrating into the supply of the relevant product themselves. Sponsored entry includes instances where buyers can help a new or smaller firm to enter or expand in the market by offering a sufficient volume or providing other support or incentives. We assess self-supply and sponsored entry under the criteria discussed in Part 4.5 below. We may also consider other forms of buyer constraints. Some examples include being able to refuse to buy from the merged firm in other markets or otherwise impose costs on the merged firm. Where these constraints exist, they can reduce the risk that a merger will harm competition substantially.Footnote 71
  12. When two competing buyers merge, we assess whether the merger would likely create, maintain or enhance market power as a buyer. This is known as monopsony power.Footnote 72 We also apply the frameworks in Part 4.4 in buyer markets and similarly assess competitive constraints.Footnote 73 A firm with monopsony power may be able to lower the price it pays to suppliers, with a corresponding reduction in supply, investment, or choices in the market.Footnote 74 We may assess monopsony power in any input market, including labour markets.
  13. A merger that creates, maintains or enhances market power in labour markets may reduce wages or benefitsFootnote 75, worsen working conditions, or limit opportunities for workers. In these cases, we generally focus on whether the workers have sufficient competitive alternatives to constrain a material exercise of market power by buyers (e.g., whether there are other effective purchasers of labour). A merger may harm competition if it eliminates rivalry between the merging firms in attracting workers, or otherwise makes it harder for workers to find effective alternatives. We may consider switching costs or any other factors that particularly affect labour mobility, such as job differentiation, search frictions, worker training and specialization, employer preferences, non-compete or non-solicitation agreements, or other restrictions.
  14. Ultimately, we analyse whether the merger would reduce the competitive rivalry that provides competitive prices, higher quality, more choices and innovation, or other benefits to trading partners in any relevant market. The remainder of Part 4.4 outlines frameworks that we may apply depending on the type of merger and nature of competition in the affected markets.

4.4.1 Mergers between competitors

4.4.1.1 Unilateral effects
  1. A merger of direct competitors (horizontal merger) eliminates rivalry between the merging firms. This can reduce the pressure to keep prices low, increase output, offer better quality, or improve service. When we review a horizontal merger, we assess whether this loss of rivalry is likely to substantially harm competition in the market.
  2. Substantial harm to competition can occur when the merger enables a unilateral exercise of market power.
  3. A unilateral exercise of market power occurs when the merged firm can profitably raise prices, without its competitors providing a sufficient constraint to prevent substantial harm to competition. By placing the pricing and supply decisions of rivals under common control, and eliminating competition between them, a merger can create an incentive to raise prices, restrict supply, or limit other dimensions of competition.
  4. When buyers have many options and can switch to similar competing products, a seller’s pricing is constrained by the potential that it may lose sales to competitors. However, when two competing firms merge, a post-merger price increase by one of them may cause some customers to switch to the other merging firm. The merged firm keeps the profits from these diverted sales after the merger. This makes raising prices more profitable and reduces the pressure to compete. In this way, eliminating rivalry between merging firms can substantially harm competition in the market.
  5. The same analysis applies to non-price dimensions of competition. When two competing firms merge, a worsening of non-price terms, such as quality, product choice, service, advertising, working conditions, or privacy, may become more profitable. As above, this is because the merged entity keeps profits from sales that would divert from one merging firm to the other if non-price offerings were worsened. We may assess unilateral effects relating to any relevant non-price dimension of competition during our review.
  6. We may assess unilateral effects differently depending on the market setting and how firms compete. Four frameworks that we commonly use are explained below.
Differentiated products
  1. In markets with differentiated products, each supplier’s product has unique characteristics that buyers value. Most mergers we review involve products that are differentiated in at least some respects.Footnote 76
  2. In these cases, the degree to which products are substitutable is a key aspect of competition. The more customers view two products as similar, and the more they are likely to switch between them, the more closely the firms offering them compete. A merger in a market with differentiated products may harm competition substantially when the merging parties’ products are close substitutes for one another.
  3. When we assess a merger in these markets, we look at how combining the two firms might change their incentives to compete.Footnote 77 Before a merger, when one of the merging firms considers raising its prices, it faces a trade-off: it will earn more on each sale it makes, but it also risks losing sales to competitors’ products. After a merger, if it raises its price, customers that would switch to the other merging firm’s product will no longer be lost. This makes price increases more attractive.
  4. The closer the two merging firms’ products compete with each other, and the higher the profit margins on the sales that would switch between them, the stronger the incentive to raise prices after the merger.
  5. We can assess how closely two of the merging firms’ products compete by looking at the proportion of switching customers that would go from one to the other if prices change – this is known as the “diversion ratio”.Footnote 78 The incentive to raise prices after a merger can then be examined using two key factors: the diversion ratio and the profit margin on the recaptured sales. When the diversion ratio or profit margins are high, the merged firm is more likely to find it profitable to materially raise prices.
  6. We also assess the competitive constraint the merging firms exert on each other using various information, including:Footnote 79
    1. how buyers have switched between their products when prices changed in the past;
    2. results from stakeholder interviews;
    3. win-loss records from sales efforts;
    4. how buyers have switched in response to changes in product features, availability, quality, consumer privacy or service levels;
    5. internal data on customer churn or retention;
    6. econometric analysis or other modelling tools based on sales, pricing or market data; and
    7. data showing how sensitive customers are to price changes – both in terms of own-price elasticity and cross-price elasticity.Footnote 80
  7. After a merger, the merging firms will have a greater incentive to raise prices if they offer products that a significant number of customers see as close substitutes.Footnote 81 This risk is also higher if the merger removes a vigorous and effective competitor from the market or if customers are not very sensitive to price increases.Footnote 82 That said, these are not the only situations where we may be concerned about a merger’s unilateral effects.
  8. We also assess how effective competitors are and how they might respond. The more that these rivals offer close substitutes, the more they are likely to constrain a post-merger price increase. We also look at smaller or niche sellers to see if they offer effective alternatives for enough customers to maintain competition. At the same time, when products are differentiated it is often in the interest of non-merging firms to raise their own prices, lessening the constraint they provide.Footnote 83
  9. When our analysis suggests the merging firms have an incentive to raise prices after the merger, we may consider other evidence that competitors may expand production, reposition their products, or extend their product lines to discipline the merged firm’s exercise of market power. Similarly, we may consider how likely it is that new firms could enter the market and what the impact of that entry would likely be. We conduct this analysis under the framework described in Part 4.5. We assess whether expansion, repositioning or product line extension would be likely, timely and sufficient given any risks, sunk costs or other entry barriers.
Homogeneous products
  1. Products are homogeneous when they are relatively similar, such that buyers perceive no difference between the products of different suppliers and value them equally.Footnote 84 In markets with homogeneous goods, firms often compete by choosing the volume they supply to the market.
  2. Normally, when one of the merging firms considers reducing its output, it faces a trade-off. On the one hand, it will lose profits on volumes it no longer supplies. At the same time, if reducing the firm’s output increases the market price, it will earn more profit on the volumes it continues to supply. After a merger, reducing output may become more profitable. This is because the firm will also earn additional profits on the volumes of its merger partner.
  3. In markets with homogeneous goods, this strategy is more likely to be profitable when:
    1. the merged firm has a larger share of the market;
    2. margins on the supply the merged firm withholds from the market to raise price are lower;
    3. other sellers do not respond strongly by expanding their supply; and
    4. customers are less sensitive to price changes.
  4. An output reduction strategy is unlikely to be profitable if the supply would be substantially replaced by other sellers, and prices would not rise. This may not happen if rivals lack the available capacity to increase their sales or output by a sufficient amount after the merger. This can be the case if their production is already committed to long-term contracts, or capacity cannot be expanded quickly and at low cost. As such, when we examine a merger involving homogeneous products we assess whether any capacity constraints would prevent remaining competitors from supplying enough product to constrain the merged firm’s exercise of market power.
Bargaining
  1. In many markets, buyers and sellers determine the terms of trade through bargaining or negotiation.Footnote 85 Sometimes, bargaining may be combined with features of the other frameworks discussed in Part 4.4.Footnote 86 In these cases, we may consider how the merger would affect negotiations. This helps us assess whether competition will be substantially harmed.
  2. Bargaining outcomes may be affected by both:
    1. bargaining leverage, which refers to a participant’s alternatives to striking a deal, and how those alternatives impact the likely deal terms; and
    2. bargaining power, which is a participant’s ability to extract more of the value from a deal, based on the participant’s negotiation skills, patience, risk tolerance or other factors.
  3. We usually focus on how a merger affects bargaining leverage.Footnote 87 When a buyer negotiates with a seller, the presence of other sellers may enable it to get better terms. If the seller merges with a rival, and this removes a competitor, the buyer’s alternatives to making a deal may be worsened. This can materially lessen the buyer’s bargaining leverage.Footnote 88 The result may be a negotiated outcome with a higher price, or worse non-price terms for the buyer.Footnote 89
  4. When we analyze a merger’s effect on bargaining leverage, we consider factors similar to the other frameworks in Part 4.4.1. For example, a merger is generally more likely to substantially harm competition where:
    1. the merging parties are close rivals and important competitive alternatives for each other’s customers;
    2. there are not many equally or similarly situated competitors available to customers; and
    3. entry or expansion by competitors would not provide similarly situated alternatives (and bargaining leverage) to customers.
  5. In some cases, buyers may actively negotiate with multiple sellers, or there may be evidence that they compare the merging parties’ offers to obtain better terms. However, a buyer does not need to have recently used a competitive alternative, or directly threatened to do so, for that alternative to provide bargaining leverage.Footnote 90 The key issue is whether the existence of the alternative has affected the importance to the buyer of reaching an agreement.
Bidding markets
  1. In some markets, buyers award contracts through auctions or similar processes where suppliers submit competing offers. These are known as bidding markets. Bidding may take many forms and may be combined with features of the other frameworks discussed in this part of the guidelines.
  2. How much a loss of competition affects the price a buyer pays depends on how closely the merging firms compete in meeting the buyer’s needs, compared to other bidders or potential suppliers. If there are many other bidders or potential suppliers that are equally or similarly situated to meet the buyers’ requirements, a merger is less likely to substantially harm competition.
  3. When analyzing a merger’s effect on bidding, we consider factors similar to the other frameworks in Part 4.4.1. When we assess bidding markets, we may look at factors such as:
    1. the number, offers and positioning of bidders involved in previous bid processes;
    2. how closely the merging firms compete compared to other bidders, in terms of product characteristics, capabilities, costs, capacity or other factors relevant to meeting buyer requirements; and
    3. the structure of the bidding process, including:
      1. how frequent and regular the bidding opportunities are (e.g., recurring vs. one-off contracts);
      2. the level of transparency and information flow, such as whether bidders know who else is bidding and the value of competing bids;
      3. what criteria are used to evaluate bids and select the winning bidder;
      4. what prequalification or eligibility requirements exist that may limit the pool of potential bidders;
      5. the size and duration of the opportunity, which can affect incentives to bid and the feasibility of entry; and
      6. The degree to which the buyer is able to commit to a particular selection process. For instance, if at the end of the bidding process there are further opportunities for negotiation or rebidding, this can influence competitive dynamics and bidder strategies.
4.4.1.2 Coordinated effects
  1. A merger may prevent or lessen competition substantially when it makes coordinated behaviour among firms easier or more likely after the merger. We look at whether the merger is likely to change the competitive dynamic in a way that makes coordination more likely or more effective.Footnote 91 Even if not all firms in the market take part, coordinated behaviour among just some of them can still substantially harm competition. Coordination that concerns only a subset of products or customers, or some, but not all, dimensions of competition can also result in substantial harm.
  2. We may assess unilateral and coordinated effects separately. However, they often arise under similar market conditions and can reinforce one another. A merger may lead to both types of effects occurring in the same or different markets. For example, post-merger coordination may be imperfect, temporary, or concern only some dimensions of competition. When this is the case, the merger may also allow the merged firm to exercise market power unilaterally. We assess whether the merger may increase the risk of either or both types of harm.
  3. Coordination involves behaviour by a group of firms that is profitable for each because of each firm's accommodating reactions to the conduct of the others. Coordinated behaviour can involve setting prices, fixing capacity, reducing service levels, allocating customers or regions, coordinating promotions, or limiting competition in other ways.
  4. Coordinated behaviour can take many forms, and may occur even without explicit communication or negotiation between firms.Footnote 92 In some cases, companies may independently recognize that it is in their mutual interest to compete less aggressively. Coordination can involve price leadership, sometimes accompanied by public announcements, signalling or other forms of communication. It can also occur through intermediaries, such as third-party market intelligence firms or pricing advisors.Footnote 93
  5. Coordination can also take the form of explicit agreements, where firms expressly agree to limit competition. These types of agreements may raise concerns under the conspiracy and bid-rigging provisions, the abuse of dominance provisions, or section 90.1 of the Act.Footnote 94
  6. Coordination between firms is more likely to occur and be sustainable when firms are able to:
    1. each recognize terms of coordination that will benefit those involved;
    2. monitor each other’s conduct and detect when another firm doesn’t follow the terms of coordination. We call this “deviating” from the terms of coordination;
    3. deter deviations using credible punishments;Footnote 95 and
    4. coordinate without being disrupted by external factors, like the responses of other competitors, or the reactions of buyers.
  7. Competition is likely to be harmed substantially when a merger makes coordination between firms materially more likely, extensive or effective. This includes situations where coordination did not exist before the merger. It also includes cases where coordination already exists but could become more effective or extensive because of the merger. As part of this assessment, we may look at various market conditions that can support or facilitate coordination, described below. Evidence regarding any history of actual or attempted collusion or coordination in the market is also relevant. The focus is not just on whether these factors are present, but also on whether the merger changes them in a way that increases the risk of effective coordination.
Market Concentration and Entry Barriers
  1. Market power often arises in markets that are concentrated and have high barriers to entry. Market concentration alone does not guarantee that a merger will lessen competition through coordination, but it is often an important factor that we consider. In concentrated markets, it is usually easier and less costly for firms to coordinate their behaviour. This is because a small number of firms can more easily recognize terms of coordination, monitor each other’s actions and respond when one firm deviates from the coordinated approach. All else being equal, when there are fewer firms in the market, coordination is generally more profitable and easier to achieve.
  2. A merger that results in a significant increase in market share or concentration may make coordination more likely, extensive or effective. Mergers that exceed the thresholds in Part 4.2.2.1 are presumed to substantially harm competition. We may consider any evidence that merging parties provide to refute this presumption within the assessment described in this framework.
  3. We may also consider barriers to entry when assessing the possible coordinated effects of a merger. If it is easy for new competitors to enter the market, price increases through coordination are less likely to be sustainable. We assess whether entry would be timely, likely and sufficient under the framework described in Part 4.5.
Other Factors Suggesting that Market Conditions are Conducive to Coordination
  1. We may assess whether other market conditions would make it likely that firms could sustainably coordinate their behaviour after the merger. This can involve considering market-specific factors that are relevant to the conditions described in paragraph 191.
  2. The list of factors below is not exhaustive, and some may be relevant to coordinated behaviour in ways beyond those described.
  3. Coordination may be easier where some of these factors are present. These are often called “facilitating factors.” However, no single factor, or group of factors, determines whether the merger is likely to substantially harm competition. We consider the overall impact of the merger on the market.
  4. We look at whether firms in a market are likely able to recognize mutually beneficial terms of coordination. We also assess whether firms are able to monitor each other’s behaviour and detect when one deviates from coordinated conduct. Factors relevant to this assessment may include:
    1. Market transparency: We assess the level of market transparencyFootnote 96 – that is, how easily firms can observe prices, competitors’ actions, and overall market conditions. When information is readily available, it becomes easier for firms to recognize terms and track one another’s conduct. This can support more effective coordination. Technologies such as algorithms, machine learning or tools that allow real-time pricing updates may make a market more transparent and reduce the costs of monitoring. They may also, in some cases, increase the speed and frequency of interactions between firms and make coordination easier to sustain. The presence of industry associations, data aggregators, market intelligence firms or third-party algorithmic pricing advisors that share information or facilitate communication among competitors may also contribute to conditions that enable coordination. In contrast, procurement processes that are complex or have multiple stages can make it harder to identify when a firm has deviated from a coordinated strategy.
    2. Vertical relationships: Firms may operate at multiple levels of the supply chain, or have access to commercially sensitive information through supply relationships. This can also increase the ability to monitor or influence competitive behaviour. Part 4.4.2 describes how we analyze the coordinated effects of non-horizontal mergers.
    3. Minority interests: We may consider the impact of common or cross-ownership. This includes cases where firms in the market have shared investors or minority stakes in one another. These structures may increase transparency or information sharing, reduce firms’ incentives to compete aggressively, and make coordinated strategies more likely.
    4. Product differentiation and cost symmetry: Recognizing mutually beneficial terms of coordination is easier when products and cost structures are similar across firms. When products are complex or highly differentiated, or cost structures vary greatly, it can be harder to reach profitable terms.
    5. Stability of demand and supply: We may consider whether firms’ costs are stable and whether demand is predictable. When costs or demand fluctuate significantly or unexpectedly, it may be harder for firms to tell whether a price change reflects a deviation from coordinated behaviour or simply a response to changing cost or market conditions. It may also be harder to coordinate in markets with rapidly changing products or frequent innovations, or where the market is growing rapidly.
  5. Profit-maximizing firms have incentives to deviate from coordinated behaviour when the expected profits from doing so exceed the expected profits from coordinating. When we assess whether coordination is likely, we may consider whether certain firms have stronger incentives to deviate. We may also consider market factors that could affect these incentives, such as the size and frequency of transactions. Coordination is generally less stable in markets where individual transactions are large and infrequent relative to total demand, as the potential profits from deviations are greater. Similarly, if individual transactions represent a significant portion of a firm’s total output, the incentive to deviate from coordinated behaviour will be greater.Footnote 97
  6. As part of this assessment, we consider whether firms can discourage others from deviating from coordinated behaviour by imposing credible punishments. Punishments are more effective when they significantly impact the profitability of deviating from coordination. Relevant factors may include:
    1. Timeliness and credibility of responses: Deviation is generally less profitable when punishments from rivals are more timely, predictable and effective. We may consider whether firms use pricing strategies – such as “meet the competition” or “most favoured customer” clauses – that commit them to following a low-pricing strategy when others lower their prices. The use of certain tools, such as automated pricing algorithms or artificial intelligence, may also impact the speed, effectiveness or predictability of responses. We may also consider the impact of customer switching costs or other factors on the effectiveness of punishments.
    2. Excess capacity: When firms have excess capacity, they may be able to oversupply the market if another firm deviates from a coordinated price. This may discourage deviation. However, excess capacity can have the opposite effect. It may give some firms both the incentive and ability to break from coordination by selling at lower prices, especially if they can quickly ramp up output. This could make coordinated behaviour less likely. For this reason, we may assess not only which firms hold excess capacity, but also their economic incentives.
    3. Multi-market contacts: When the same firms compete across multiple markets, they may have more ways to discourage a deviation – such as retaliating in another market – which can make coordination more stable.
History of Collusion or Coordination
  1. We also consider whether there is a history of collusion or coordination in the market. Evidence of past coordinated behaviour suggests that firms have previously been able to overcome the challenges involved in effectively coordinating. This evidence may include pre-merger pricing, margins or other market outcomes that are consistent with past coordination. In markets where past attempts to coordinate have been imperfect or incomplete, or have not been sustained, we assess whether the merger is likely to make coordination more effective. Prior conduct can indicate a risk of future coordination, but it is not required for a finding of substantial harm to competition after a merger.
Impact of the Merger on Coordinated Behaviour
  1. We consider whether the merger changes the competitive dynamic in a way that makes coordination between firms more likely or more effective. A merger may create conditions that allow coordination to emerge where it did not exist before, or it may strengthen existing coordination by making it more extensive or effective. As part of this analysis, we examine whether market conditions were conducive to coordination before the merger, and whether the merger makes coordination more effective or more likely. We also look at any factors that previously constrained coordinated behaviour – such as the presence of disruptive competitors– and determine whether the merger reduces or removes those constraints.
  2. A merger may make coordination more likely or effective in a number of ways, including by:
    1. Increasing concentration: In highly concentrated markets, effective coordination may be constrained by the number of firms. By reducing the number of rivals, a merger may make coordination more profitable and easier to achieve. When a merger results in a significant increase in market share or concentration (as described in Part 4.2.2), it is presumed to be likely to substantially harm competition.
    2. Reducing asymmetries: When firms are very different, it can be harder for them to coordinate effectively in a way that is profitable for each of them. For example, there may be differences in market share, size, cost structure, or product offering. If a merger reduces or removes asymmetries between the merging firm and its main competitors, coordination may become easier. The firms may be better able to align their strategies to benefit each of them. On the other hand, if the merger increases asymmetries between the merged firm and its rivals, coordination may become less profitable and less likely to occur.
    3. Eliminating a maverick: Before a merger, coordination may be constrained by a particularly vigorous and effective competitor in the market, or one which has weaker incentives to coordinate. This is often called a maverick. A maverick firm plays a disruptive role and pushes other firms to compete more actively, making coordination harder to sustain. If a merger involves the acquisition of a maverick, this constraint may be removed, making coordination more likely or effective. A merger does not have to eliminate a maverick firm to harm competition. In some cases, a merger may prevent a maverick from entering the market, expanding its operations, or otherwise competing as effectively as it could have. A merger that reduces the ability or incentive of a maverick to disrupt coordination may increase the likelihood or effectiveness of coordination.
    4. Otherwise making market conditions more conducive to coordination: We consider whether a merger may otherwise affect firms’ incentives to coordinate or their ability to recognize terms of coordination, monitor deviations, or impose credible punishments.
4.4.1.3 Innovation and dynamic competition
  1. We also assess whether a merger may facilitate the exercise of market power by harming the process of change and innovation.
  2. When we review mergers, we are concerned with both static and dynamic competition. Static competition focusses on market outcomes at a given point in time, such as prices. Dynamic competition involves rivalry over time based on investments or innovation. It can improve things like products or services, how firms do business, efficiency, or productivity. Dynamic competition has a critical role in improving the lives of Canadians over time.
  3. A merger can harm dynamic competition by lessening incentives to innovate or to invest in products or features. Firms have incentives to innovate when developing new or improved products, or providing more value to customers, may allow them to gain profitable sales from competitors. Similarly, firms may have incentives to innovate in order to protect sales from potentially being lost to rivals that are developing new or improved offerings. A firm that merges with a current or potential future rival no longer needs to innovate to win sales from that rival, or protect sales from being lost to that rival, in the future. A merger affecting dynamic rivalry may therefore substantially harm competition.Footnote 98
  4. A merger may also give the merged firm the ability or incentive to harm the process of change or innovation in other ways. For example, this may involve increasing barriers to entry or expansion, or otherwise entrenching the position of incumbents.
  5. When a merger removes an innovative firm that presents a threat to incumbents, it may hinder or delay the introduction of new products, processes, marketing approaches, research and development initiatives or business methods. This can include situations where one of the merging parties was developing a product expected to compete with an existing product of the other party, or situations where both merging parties were developing products expected to compete with each other in the future. Even nascent competitors, or those without current sales in the market, can represent a significant dynamic threat to incumbents.
  6. We also evaluate the general nature and extent of change and innovation in a market. We evaluate the competitive impact of new products and processes. We also consider change and innovation in relation to distribution, service, sales, marketing, packaging, buyer tastes, purchase patterns, firm structure, the regulatory environment and the economy as a whole.
  7. In some markets, innovation and dynamic competition may be particularly important considerations. This includes markets where substantial investments are needed to develop a competitive offering. Examples include markets for pharmaceuticals and certain digital services. In markets that feature network effects (described in Part 4.4.3), earlier entrants may have an advantage in attracting users to their product. They may primarily be constrained by dynamic rivalry.
  8. When we define markets and assess competition in cases where innovation is important, we may need to consider products or markets that do not exist yet. We may take into account the parties’ assets devoted to developing relevant products, including research and development assets, intellectual property and specialized employees. We may also consider:
    1. the strategic objectives of the parties’ innovation efforts;
    2. the anticipated competitive impact of the parties’ innovations; and
    3. any evidence that the parties considered each other close competitors for innovation, or monitored each others’ innovation efforts.

4.4.2 Non-horizontal mergers

  1. Non-horizontal mergers are mergers between firms supplying products that do not compete with each other directly.
  2. We assess two main types of non-horizontal mergers with the potential to harm competition:
    1. Vertical mergers are mergers between firms that operate at different levels of a supply chain. For example, this could be a merger between a manufacturer and a retailer of its products.Footnote 99
    2. Conglomerate mergers are mergers between firms offering products that are not part of the same or competing supply chains. This can include mergers involving complements or products that are related because they are purchased by the same customers.Footnote 100 For example, a merger between a supplier of computers and a supplier of software would be a conglomerate merger.Footnote 101
  3. Non-horizontal mergers may lessen or prevent competition in some circumstances, as outlined in this part of the guidelines. We assess the likelihood of both unilateral and coordinated effects in such cases.
  4. Many mergers include both horizontal and non-horizontal elements, in the same or different markets.Footnote 102 In these cases, we assess the combined effect on competition in a given relevant market.
4.4.2.1 Unilateral Effects: Foreclosure
  1. We consider whether a non-horizontal merger is likely to increase the ability to exercise market power without relying on accommodating responses from competitors.
  2. In most cases, we focus on whether a non-horizontal merger will substantially harm competition by providing the merged firm with the ability and incentive to foreclose competitors.Footnote 103
  3. Foreclosure refers to a strategy that limits a rival’s access, such that the rival’s ability or incentive to compete effectively is reduced. In vertical mergers, it may involve, for example:
    1. Limiting a rival’s access to a particular input (for example, by raising the price). This could potentially raise that rivals’ costs and is called input foreclosure.
    2. Limiting a rival’s access to a set of customers or route to market. This is called customer foreclosure. This may, for example, deny the rival economies of scale or scope, or otherwise affect their ability to compete effectively.
  4. In conglomerate mergers, foreclosure may involve, for example:
    1. Requiring or inducing a customer to purchase one product as a condition of purchasing another product. This is often called tying.
    2. Reducing or impeding interoperability with related products (in some cases, reducing the network effects available to rivals).
  5. Foreclosure often involves the merged firm using its position in one market to weaken or exclude its rivals in another. By lessening or removing the constraint that those competitors provide, foreclosure may substantially harm competition.
  6. When we assess foreclosure, we usually consider both (1) a market in which competition may be harmed (the relevant market), and (2) a product, set of customers or route to market for which access may be foreclosed (the related product).Footnote 104 For example, when we assess input foreclosure in a vertical merger, the relevant market may be the downstream market in which the merged firm competes with rivals. The related product may be an upstream input those rivals use to compete.
  7. Foreclosure may occur through a variety of means. These can include refusing to supply or purchase the related product, or changing the terms of trade. For example, a firm may increase the price charged to rivals.Footnote 105 We may not predict a precise means of foreclosure in our analysis. We consider all potential forms of foreclosure. We generally will not conclude that the merged firm is unable to foreclose solely based on the terms of its contracts with rivals.Footnote 106 In our analysis of harm to competition, we focus on the overall economic incentives of the merged firm.
Framework for Assessing Foreclosure
  1. When assessing the likely foreclosure effects of a merger, we consider whether the merged firm would have the ability and incentive to substantially harm competition in a relevant market by foreclosing rivals.
  2. To explain this analysis, this Part focusses on an example of input foreclosure in a vertical merger. However, we apply a similar framework when assessing other forms of foreclosure. The elements of this framework are interrelated and may, in practice, be assessed together.
Input Foreclosure: Ability to Foreclose
  1. When we assess the ability to foreclose, we focus on the competitive constraints that the merged firm faces in the upstream market. In particular, we assess the alternatives to the related product that would be available to rivals if their access were foreclosed.Footnote 107 The merged entity will not be able to substantially harm competition through input foreclosure if rivals in the relevant market could readily turn to effective alternatives in response to an attempt to foreclose.
  2. This generally involves considering the factors in Part 4.4 for the supply of the related product to the relevant rivals. For example:
    1. the degree to which other inputs are effective substitutes;
    2. the effectiveness of remaining competitors in the supply of the input, including their available capacity, and the extent of product or other differentiation among firms;
    3. switching costs, or other impediments to switching from the merged firm’s supply;
    4. any ability to self-supply the relevant product; and
    5. whether entry, expansion or repositioning would be timely, likely and sufficient to prevent substantial harm to competition in the case of foreclosure (see Part 4.5).
  3. When we assess how effective remaining competitors would be, we may consider whether it would be in their interest to increase price or accommodate foreclosure. This can lessen the competitive constraint they provide.Footnote 108
  4. We may consider market shares and concentration in the supply of the related product when we analyze these alternatives.Footnote 109 Where the merged firm has a significant market share, this may suggest it faces fewer competitive constraints and is more likely to be able to foreclose rivals.Footnote 110 We do not apply specific share or concentration thresholds when assessing the ability to foreclose, but we are more likely to investigate further where the merged firm’s share of the supply of the related product exceeds 30 percent.
  5. Where rivals have access to many effective alternatives to the merged firm’s supply of the input, this is generally sufficient for us to conclude that substantial competitive harm through foreclosure is not likely.
Input Foreclosure: Incentives and Harm to Competition
  1. Where there may be an ability to foreclose, we consider the incentives of the merged firm to foreclose and whether they are likely to lead to substantial harm to competition in any market.
  2. Foreclosure may weaken the competitive constraint posed by rivals in a number of ways. In some cases, foreclosure may lead to a competitively-significant rival falling below minimum viable scale and exiting the market entirely. In other cases, it may lead the affected rivals to increase their prices, decrease investment or innovation, or otherwise compete less effectively. We also consider whether foreclosure will likely discourage or prevent entry in any relevant market. In each case, the incentives to foreclose depend on the benefit the merged firm derives from weakening or excluding its rivals.
  3. Generally, the incentives resulting from a vertical merger (e.g., between an upstream input supplier and a downstream partner) can include:
    1. An incentive for the merged firm to increase the price of the upstream partner’s input to rivals (or otherwise foreclose rivals). After the merger, weakening or removing rivals in this way will, in part, cause sales in the relevant market to divert to the downstream merging partner. The greater this diversion, and the greater the likely downstream margin earned on those sales, the greater the incentive to foreclose.Footnote 111
    2. An incentive for the merged firm to increase the price of the downstream partner’s product (or otherwise exercise market power).Footnote 112 After the merger, sales that would previously have been lost to downstream rivals if price increased will, in part, divert to rivals that will use the merged firm’s upstream product. The greater the diversion to those rivals, and the greater the likely upstream margin earned on those sales, the greater the incentive to increase price.
  4. Our assessment of foreclosure incentives is not purely quantitative and we may not focus solely on short-term outcomes. We may assess whether foreclosure is likely to affect dynamic competition. We may consider whether the merged firm would gain broader benefits through foreclosure such as entrenching its market position or protecting longer-term profits. We consider qualitative evidence when we assess foreclosure strategies. This can include the merging parties’ plans, where they indicate a likelihood of foreclosure.
  5. We assess whether, given the merged firm’s ability and incentives, substantial harm to competition is likely in any market.Footnote 113 When we evaluate the likely impact in the relevant market, we consider factors like:
    1. The competitive importance of the related product: When access to the related product is more important to rivals’ ability and incentive to compete, foreclosure and harm to competition are likely to be more substantial. We consider whether access is important to rivals’ pricing, product quality, levels of innovation or any other aspect of their effectiveness.
    2. Close competition between the merged entity and foreclosed rivals: The more closely that the foreclosed rivals compete with the merging downstream partner, the more substantial the foreclosure incentive and harm to competition in the relevant market.
    3. Competition in the relevant market: The more that the potentially foreclosed rivals are significant or disruptive competitors in the relevant market, the more substantial the harm to competition if they are weakened. Similarly, when the downstream merging partner is otherwise a significant competitor, changes in its incentives may cause substantial competitive harm. We may also assess whether entry or expansion in the relevant market may be timely, likely and sufficient as described in Part 4.5.Footnote 114
  6. We may consider market shares and concentration in the relevant market as part of our analysis of these factors.
Other Types of Foreclosure
  1. We apply a similar framework when we examine customer foreclosure. We assess whether the merger will provide an ability or incentive to foreclose upstream rivals by refusing to purchase from them, or by otherwise limiting their routes to market (the related product). Foreclosure may, for example:
    1. deny rivals economies of scale or scope;
    2. reduce their incentives to invest;
    3. cause them to exit; or
    4. otherwise undermine their effectiveness in the relevant upstream market.
  2. The incentive to foreclose (and the potential harm to competition) will generally depend on how many sales the merged firm would gain from other customers in the case of foreclosure, and the likely profits from those sales. Where there are many effective alternatives to selling to the merged entity, this is generally sufficient to conclude that substantial harm to competition through foreclosure is not likely.
  3. Our assessment of foreclosure in conglomerate mergers is usually analogous to how we assess foreclosure in other settings. We consider whether there is a merger-specific ability or incentive to limit access through tying, bundling, degradation of interoperability, or other means. We assess whether this would likely result in competitors being weakened or removed and competition being substantially harmed in any relevant market. This may be more likely where foreclosure would deny network effects, or economies of scale or scope, to a rival.
4.4.2.2 Other Types of Unilateral Effects
  1. We may assess whether other effects of a non-horizontal merger will likely harm competition in any relevant market. For example:
    1. Increasing barriers to entry: Paragraph 93(d) of the Act lists any effect of a merger on any barriers to entry into a market as a factor relevant to our analysis. We may assess whether a non-horizontal merger is likely to increase barriers to entry in a market. For example, this may occur where the merger reduces the merged entity’s incentive to supply (or interoperate with) potential entrants, or increases the risk of future foreclosure. The result may be that potential entrants need to successfully enter two markets at the same time. A non-horizontal merger that increases barriers to entry may also entrench the market position of incumbents, further to paragraph 93(g.2) of the Act, including where it is likely to deprive potential entrants of network effects, or economies of scale or scope.
    2. Access to competitively-sensitive information: We may consider whether rivals will have less incentive to innovate or engage in other pro-competitive initiatives after the merger. This may happen, for example, when a rival competes with one of the merging firms, while having a supply relationship with the other. In these cases, the merger may result in the rival’s competitor gaining access to its competitively-sensitive information or plans. This can discourage the rival from pursuing pro-competitive initiatives that may be undermined by the merged entity. Alternatively, rivals may choose to avoid a supply relationship with the merged entity after the merger to prevent their competitively-sensitive information becoming available to the merged firm. This may occur even where it would increase their costs or otherwise make them less effective competitors.
4.4.2.3 Coordinated Effects
  1. We also consider whether a non-horizontal merger increases the likelihood or effectiveness of coordination among firms. For example:
    1. Vertical mergers may facilitate coordination by:
      1. Increasing transparency and access to confidential information: A merger may enable the merged firm to observe its rivals’ increased purchases of inputs, or directly obtain information on pricing, discounts, promotions or other competitive initiatives.
      2. Facilitating deterrence: Vertical mergers may provide additional ways of discouraging deviations from coordinated conduct, such as by foreclosing access to inputs or customers. Similarly, a vertical merger may provide a means for the merged entity to weaken or remove a competitor that otherwise acted as a maverick in the relevant market.
      3. Changing incentives: Vertical mergers may reduce the merged entity’s incentive to disrupt coordination. For example, the merged entity may have greater incentive to coordinate with rivals with respect to the supply of an upstream product when a price increase would weaken its downstream competitors.

      Generally speaking, the greater the degree of vertical integration in a market, the greater the risk of coordinated behaviour.

    2. Conglomerate mergers may similarly facilitate coordination by, for example:
      1. increasing the degree of multi-market exposure among firms;
      2. changing the merged firm’s incentives; or
      3. providing additional ways to deter deviations.
  1. We may consider whether these effects reinforce other forms of competitive harm that we are assessing. The framework for our assessment of coordinated effects is described in Part 4.4.1.2.

4.4.3 Platforms and multi-sided markets

  1. Multi-sided platforms provide services to two or more user groups and manage interactions between them. Examples of digital platforms include online marketplaces that match buyers with sellers, or social media platforms connecting users and advertisers. Multi-sided platforms in other sectors include shopping centres (serving both tenants and shoppers), newspapers (advertisers and readers) and credit card networks (cardholders and merchants).
  2. When we assess mergers involving multi-sided platforms, we apply the frameworks described elsewhere in Part 4.4 while considering their particular features. We define markets as described in Part 4.2.1.6.
Features of platforms
  1. Common features of multi-sided platforms include:
    1. multiple sides or user groups that interact, or find each other, through the platform;
    2. platform participants on each side that provide or receive services, use the platform to find or interact with other participants, or develop services that enhance the platform;
    3. a platform operator that manages and provides the core services to connect participants and controls access, monetization and other aspects of the platform;
    4. the existence of network effects, where the platform has more value to a participant when it has more users; and
    5. various forms of monetization (e.g., commissions, access charges or use fees) that may be asymmetric (resulting in different pricing for each user group, or even zero prices for some) and are controlled by the platform operator.
  2. Network effects are a key feature of multi-sided platforms. They can be direct or indirect:
    1. they are direct when a platform has more value to a participant when there are more users on the same side; and
    2. they are indirect when a platform has more value to a participant when there are more users on other sides of the platform.
  3. Network effects can be asymmetric. For example, advertisers on a social network may benefit if there are more users, even though users may not value more advertisers.
  4. There are often significant economies of scale or scope associated with multi-sided platforms. These, combined with strong network effects, may reinforce the growth and market position of incumbents. As a platform gains participants, it becomes more valuable to others. This attracts further participants and in turn increases network effects. In some cases, this may lead to “tipping” towards a dominant platform.
  5. We consider whether these factors make it difficult to enter and expand, and whether smaller competitors offer an effective competitive constraint. When we analyze the constraint posed by rivals, we may assess the extent of “multi-homing”, or the simultaneous use of more than one platform. Multi-homing can allow participants to access network effects across multiple platforms, while still benefiting from competition between them. We may also consider the potential for competitors to develop network effects and economies of scale or scope through a niche or related offering.
  6. Dynamic competition may be particularly important in platform markets. When assessing a merger, the most effective competitive threat to a dominant platform may be the potential for displacement or disintermediation by an innovative competitor, or the growth of a nascent competitor with niche or complementary offerings.
Assessment of harm to competition
  1. We may apply any of the frameworks described in Part 4.4 when assessing platforms, depending on the merger.Footnote 115 For example, we may consider:
    1. A merger between a platform and a horizontally competing platform, or a potential competitor: Platforms generally offer differentiated products (see Part 4.4.1.1). We may consider whether a merger with a potential entrant or nascent competitor will likely prevent competition or otherwise entrench an incumbent’s market position. This may include mergers with potential competitors that offer complementary products or technologies, that benefit from economies of scope (including access to relevant data), that operate in a specialized niche, or that otherwise serve the same customer base.
    2. A merger between a platform operator and a platform participant, or potential participant:Footnote 116 We may assess whether a merger between a platform operator and a participant would likely provide the ability or incentive to substantially harm competition for products offered on the platform (see Part 4.4.2). For example, we may focus on whether the platform operator would engage in self-preferencing, or otherwise foreclose competing platform participants, such that competition is substantially harmed.Footnote 117 We may also assess whether the merged firm would have the ability and incentive to foreclose competing platforms by withholding or lessening participation on their platforms. This may deprive them of network effects or economies of scale.
    3. A merger involving related products that may otherwise lessen or prevent rivalry between platforms: We may assess whether a merger would provide the ability or incentive to harm rivalry with competing platforms in other ways. A merger may provide a platform operator with control of a tool that makes multi-homing easier, or an input or data on which competing platforms rely. Alternatively, a merger may increase an operator’s incentives to deny interoperability, undermine multi-homing, or impose additional switching costs.
  2. When digital platforms are offered with complementary, interoperable or related products (for example, as part of a digital ecosystem), we assess the overall effect of combining the merging firms’ assets and capabilities.Footnote 118 This includes assessing whether the merged entity will have an ability or incentive to entrench its position or otherwise substantially harm competition in any relevant market by degrading interoperability, steering participants or foreclosing present or future rivals (see Part 4.4.2).
  3. Our analysis is not limited to these examples, and a single merger may raise concerns under multiple frameworks or in multiple markets. As part of our analysis, we may assess the effect on participants on multiple sides of a platform. Our goal is to determine whether substantial harm to competition is likely in any relevant market.

4.5 Entry

  1. When we review a merger, we may consider whether entry or expansion by competitors would prevent substantial harm to competition.Footnote 119 Where the merged firm faces fewer competitive constraints in the market after a merger, its ability to exercise market power may still be constrained by the fact that competitors would enter or expand in response.Footnote 120
  2. However, entry or expansion of this type will not prevent substantial harm to competition unless it is likely, timely, and sufficient to constrain a material exercise of market power.
  3. As part of our analysis, we look at the types of barriers that may prevent or discourage entry in the relevant market. The higher these barriers are, the less likely it is that entry or expansion will reduce potential harm to competition. However, our focus is ultimately on the overall likelihood of entry or expansion, even where specific barriers to entry or expansion cannot be assessed precisely.
  4. Highly concentrated markets often have significant barriers to entry that make it difficult for new firms to compete. When a merger meets the thresholds in Part 4.2.2.1, we generally require clear and convincing evidence showing that entry would be likely, timely, and sufficient in response to any presumption of substantial harm.

4.5.1 Assessment of Entry

  1. We assess whether entry or expansion would be:
    1. timely;
    2. likely; and
    3. sufficient to constrain an exercise of market power.
  2. If entry is likely, timely and sufficient in scale and scope, it will be difficult for the merged entity to sustain an exercise of market power. This is because buyers of the product in question will be able to turn to the new entrant(s) as an alternative source of supply.
Timely
  1. We assess how long it would take a competitor to enter the market and become an effective rival in response to a material price increase expected from a merger. In general, the longer it takes for entrants to become effective, the less likely it is that firms in the market will be deterred from exercising their market power. For new entry to deter a price increase, entrants must respond and affect prices within a reasonable time.
  2. We require that entry happen quickly enough to prevent or counteract any material price increase caused by the merger, such that competition is not likely to be substantially harmed.
Likely
  1. When determining if new competitors are likely to enter the market, we generally start by looking at firms that appear to have an advantage in entering. Other potential competitors may also matter, but we typically focus on sources of potential competition that include:
    1. fringe firms already in the market;
    2. firms that sell the relevant product in nearby geographic areas;
    3. firms that sell similar products, or make products with machinery or technology similar to that used to make the relevant product;
    4. firms that sell in related upstream or downstream markets, or offer complementary products;
    5. firms that use similar distribution channels; and
    6. firms that use similar marketing and promotional methods.
  2. When assessing entry or expansion, we may look at the experiences of firms that have tried to enter or grow in the same or similar markets in the past. These experiences can provide a useful starting point for identifying the types of barriers to entry that may exist. If firms have easily and quickly established themselves as effective competitors , that may suggest that barriers to entry are low. On the other hand, if new competitors have struggled to succeed or if there is little or no history of entry, it may suggest higher barriers. That said, our final assessment focuses on whether entry is likely under the conditions that would exist after the merger, and is not based only on past experience.
  3. We assess how likely new entry is by looking at:
    1. the commitments potential entrants must make;
    2. the time needed to become effective competitors;
    3. the risks involved; and
    4. the likely rewards.
  4. We consider any delays, losses, sunk costs, and risks that might make entry less likely or less successful. We also assess how potential entrants may expect existing firms to respond to entry and whether customers are likely to support a new entrant or help it reach the sales levels it needs to succeed.
  5. When assessing the likelihood of entry, we may consider whether a new entrant would be able to compete profitably. If we assess profitability, we do so based on the prices and conditions expected after entry. These are often similar to pre-merger price levels. For example, if a competitor could only enter the market below the minimum viable scale, that is, below the minimum size needed to be profitable, we would not consider that entry likely.
  6. We may also consider whether an expectation of entry or expansion is consistent with the merging parties’ plans, the strategies of potential entrants or the rationale for the merger itself.
Sufficient
  1. When assessing whether entry would be sufficient in scale and scope to prevent harm to competition, we examine what would be required from potential competitors to deter or counteract a material price increase. We also consider any limits on new entrants’ capacity or ability to compete effectively.
  2. Some firms may enter the market by focusing on a niche to avoid direct competition with the merged firm. When this is the case, their entry may not be sufficient to constrain an exercise of market power.
  3. Entry should also be sustainable. In some cases, entry may be initially easy, but new firms may struggle to stay in the market and provide a durable constraint.Footnote 121 We assess whether entry would be viable and constrain the merged firm’s market power on an ongoing basis.

4.5.2 Types of Barriers to Entry

  1. Barriers to entry are factors that affect the timeliness, likelihood or sufficiency of entry. These barriers can take many forms. They can include absolute restrictions that completely block entry, or sunk costs and other factors that increase the cost and risk of entry and discourage it.
  2. Even if individual barriers may not seem significant on their own, we consider their combined effect. Taken together, multiple barriers can effectively deter new competitors from entering the market. Uncertainty regarding future entry conditions, barriers to entry or expansion, or likely returns on investment can also discourage potential entrants.
  3. Barriers to entry or expansion can include:
    1. Sunk costs: These are expenses that cannot be recovered if a business exits the market or scales back its operations. New entrants may need to invest in market research, product development, equipment, staffing, and distribution systems. They may also face additional challenges, such as needing market-specific assets, overcoming brand loyalty, or competing with firms that use strategic tactics to protect their position. Sunk costs can reduce the likelihood of entry when there is a risk that they will be outweigh the benefits of entry for a competitor. Established firms have a cost advantage because they have already made these investments.
    2. Regulatory barriers: These can include barriers to international or domestic trade like tariffs. They can also include regulations that control market entry. Examples can include the need for approvals, testing, or certification. Regulatory barriers can give existing firms significant cost advantages over potential new entrants. In some cases, they create serious - and sometimes insurmountable - impediments to entry.
    3. Reputation: The need to build a reputation as a reliable or high-quality seller can be a barrier to entry. This may be especially important in industries where services are a key part of the product. In these cases, the investments and time needed to earn a strong reputation can make profitable entry more difficult and delay the new competitor’s ability to have an impact on the market.
    4. Cost advantages: Incumbent firms may have other cost advantages that can deter new entry. They may have lower transportation costs or control over scarce or hard-to-replicate resources like technology, land, natural resources, and distribution channels. They may also benefit from network effects or easier access to capital.
    5. Switching costs: If there are costs to switch to a different supplier, this can make it harder for competitors to gain customers. This may be especially important when there are economies of scale or scope, or network effects matter to be an effective competitor. These can be a significant barrier to entry, including where they make it harder for new or smaller firms to reach the minimum efficient scale needed to compete effectively. Long term contracts with incumbent firms can add to these switching costs. These may include automatic renewals, rights of first refusal, most-favoured-customer clauses, “meet or release” terms, or termination fees. Such contracts can make it harder for buyers to switch. This can make it harder for new firms to attract enough customers to compete effectively, even if other barriers to entry are low. Other examples of switching costs are described in Part 4.2.1 of these guidelines.
    6. Economies of scale or scope: Economies of scale exist if the average cost of producing a product goes down when a firm produces more of that product. Economies of scope exist when the average cost of producing a product goes down when the firm produces other products. In markets where economies of scale are important, entering on a small scale can be difficult unless a new firm can successfully target a niche. On the other hand, entering on a large scale may expand capacity to supply beyond market demand. This could decrease prices and make entry less profitable and less attractive.
    7. Network effects: These can provide advantages to established firms, making it harder for firms to enter or grow in the market. Network effects exist when a product’s value increases as more people use it. They can be direct or indirect. Network effects are discussed further in Parts 4.2.1.6 and 4.4.3 of these guidelines.
    8. Learning by doing: In some cases firms become more effective competitors the more they compete in a market. This can be because they learn from past experience to improve their products or processes. This can provide advantages to existing firms and make new entry less attractive.
    9. Access to data: In some industries, access to data is important to be an effective competitor. This can include data on how products are used, or consumer information which may be used to improve products or processes. This can provide advantages to existing firms who have already accumulated data through their operations in a market.
    10. Access to limited or non-duplicable inputs: Competitors may not be able to enter or expand in a market if they cannot access important inputs that are limited or cannot be easily duplicated, such as specialized labour. In some markets, new firms may need to rely on existing rivals for key inputs, infrastructure, or complementary products (for example, compatibility with a dominant platform). This can create risks for new entrants, such as higher prices, limited supply, or strategic delays. These risks may discourage them from entering the market or prevent them competing effectively.
    11. Market maturity: Markets are mature when overall demand is expected to stay the same or go down over time. Mature markets can be harder to enter, as a firm may need to take business from established competitors to grow. It may be less attractive to invest in assets that would be less useful as market demand goes down. Entering a market is often easier and faster during its start-up and growth stages, when demand is growing and competitive dynamics change more quickly.
  4. When considering barriers to entry or expansion, we assess the conditions that would exist after the merger. Entry conditions may be altered by the merger itself. A merger can raise barriers to entry by increasing the costs, risks, or time required for new competitors to enter the market and compete effectively. For example, a vertical merger may force potential entrants to compete simultaneously at multiple levels of the supply chain.
  5. We also consider whether a merger could entrench the position of leading incumbents in the market. This may be the case when the merger makes it harder for current or future competitors to enter or expand. This may be due to increased barriers to entry, such as additional switching costs. It may also occur when the merger gives incumbents a greater ability or incentive to engage in exclusionary conduct, such as limiting access to key inputs, customers, or technologies. These strategies can make it harder for rivals to compete and may further reinforce the dominance of leading firms.

4.6 Failing firms and exiting assets

  1. Paragraph 93(b) of the Act lists “whether the business, or a part of the business, of a party to the merger or proposed merger has failed or is likely to fail” as a factor relevant to our analysis.
  2. Probable business failure does not provide a defence for a merger that is likely to prevent or lessen competition substantially. However, parties may be able to prove that the merger is not the cause of the loss of a competitor if they can show that, in the absence of the merger, imminent failure is probable and the assets of the firm are likely to exit the relevant market and no longer materially impact competition in that market.Footnote 122
  3. Merging parties are encouraged to make any “failing firm” submissions as early as possible.
  4. To establish that business failure is likely in the absence of the merger and so the merger is not the cause of substantial harm to competition, parties should provide evidence demonstrating both that:
    1. the firm is failing; and
    2. there is no alternative to the merger likely to result in a materially greater level of competition.

Business failure

  1. We consider a firm to be failing if:
    1. it is insolvent or is likely to become insolvent;Footnote 123
    2. it has initiated or is likely to initiate voluntary bankruptcy proceedings; or
    3. it has been, or is likely to be, petitioned into bankruptcy or receivership.
  2. The parties should show that the firm is unlikely to be able to successfully reorganize pursuant to Canadian or foreign bankruptcy legislation, the Companies' Creditors Arrangement Act, or through a voluntary arrangement with its creditors.
  3. We will consider claims of probable business failure that are supported by reliable and objective evidence about the firm’s financial and competitive situation.Footnote 124 Claims that are based on the firm’s subjective expectations or unsupported projections will not be considered credible.

Alternatives to the merger

  1. Even if a firm is failing, the parties should establish that none of the following alternatives to the merger exist and are likely to result in a materially higher level of competition than if the proposed merger proceeds:
    1. Acquisition by a competitively preferable purchaser: Whether there is any alternative purchaser:
      1. whose purchase of the firm or part of the firm is likely to result in a materially higher level of competition in the market;Footnote 125 and
      2. who is willing to acquire the firm or part of the firm at a price that is greater than the liquidation value plus any costs associated with making the sale.
    1. If the parties have not conducted a thorough search for such a purchaser, we will require the involvement of an independent third party (such as an investment dealer, trustee or broker who has no material interest in either of the merging parties or the proposal) to conduct a search as part of our assessment.Footnote 126
    1. Retrenchment/restructuring: Whether retrenchment or restructuring is likely to result in a materially higher level of competition than if the merger proceeds. The retrenchment or restructuring of a failing firm may enable it to survive as a meaningful competitor by narrowing the scope of its operations, for instance, by downsizing or withdrawing from the sale of certain products or from certain geographic areas.
    2. Liquidation: Whether liquidation is likely to result in a materially higher level of competition than if the merger proceeds. In some cases, liquidation can facilitate entry into a market by enabling actual or potential competitors to compete for the failing firm's customers or assets to a greater degree than if the failing firm merged with the proposed acquirer.

4.7 Pro-competitive benefits

  1. In certain cases, mergers may have benefits that are pro-competitive and increase rivalry. These benefits could be one consideration, among others, that factors into our examination of whether competition is likely to be harmed substantially in any relevant market.Footnote 127
  2. In order to be considered in our analysis, any pro-competitive benefits must be:
    1. Verifiable and likely to occur: While the evidence supporting these claims will often be in the merging firms’ possession, it must be reliable evidence and not merely the subjective or speculative predictions of the merging parties.
    2. Specific to the merger: We consider whether there are other ways they could be achieved without the merger under review, including through a modified version of the merger.
    3. Rivalry-enhancing: They must enhance rivalry, and cannot harm the competitive process. Cost savings associated with the harmful elimination of a competitor, a narrowing of market options, or the entrenchment of market power will not justify an anti-competitive merger, regardless of their scale.
  3. Some mergers may result in a more effective use of productive resources, or “efficiency," where they lead to certain types of cost savings, or benefit consumers by combining complementary assets or products.Footnote 128 Efficiencies do not constitute a defense to an anti-competitive merger under the Act. We consider them as part of our overall analysis of harm to competition only where they are clearly merger-specific, substantiated with rigorous and independent evidence, and demonstrably likely to enhance competitive outcomes in a way that benefits Canadians.
  4. We do not consider cost savings that result from a redistribution of wealth, or a reduction in output or quality, as opposed to real resource savings.Footnote 129 Cost savings arising from reduced headcount, overhead consolidation, or other forms of internal restructuring will generally not be relevant unless they result in direct, tangible, and timely enhancements to competition.
  5. Generally, when a merger otherwise presents significant competition concerns, even gains that are supported by rigorous evidence are unlikely to change our conclusions regarding harm to competition.

5 Appendix A: Analysis of control and significant interest

This Appendix sets out our approach to analysing control and significant interest.

Meaning of Control

  1. The acquisition of “control” is a merger under section 91 of the Act. With respect to corporations, subsection 2(4) of the Act says that an entity or individual controls a corporation when they directly or indirectly hold more than 50 percent of the votes that may be cast to elect directors of the corporation, and which are sufficient to elect a majority of such directors.
  2. With respect to entities other than corporations (including partnerships), subsection 2(4) says that control occurs when an entity or individual directly or indirectly holds an interest in the entity that entitles them to receive more than 50 percent of the profits of the entity or more than 50 percent of its assets on dissolution.

Meaning of Significant Interest

  1. The acquisition of a “significant interest” is also a merger under section 91 of the Act. We may also assess significant interest in other contexts, such as when a merging party holds an interest in a competitor that is not a party to the merger.
  2. The Act does not define “significant interest”. In assessing whether an interest is significant, we assess whether the person acquiring or establishing the interest (the “acquirer”) obtains the ability to materially influence the competitive behaviour of the target business or the incentive to materially change its own competitive behaviour. The factors that may be relevant to our analysis of whether a particular minority shareholding, interest in a combination, agreement or other relationship or interest represents a significant interest (as per paragraph 26) include the following:
    1. voting rights attached to the acquirer's shareholdings or interest in a combination;
    2. the status of the acquirer of partnership interests (e.g., general or limited partner) and the nature of the rights and powers attached to the partnership interest;
    3. the holders and distribution of the remaining shares or interests (whether the target business is widely or closely held, and whether the acquirer will be the largest shareholder);
    4. board compositionFootnote 130 and board meeting quorum, board leadership, attendance and historical voting patterns (whether the acquirer will be able to carry or block votes in a typical meeting);
    5. the existence of any special voting or veto rights attached to the acquirer's shares or interests (e.g., the extent of shareholder approval rights for non-ordinary-course transactions);
    6. the terms of any shareholder or voting agreements;
    7. the dividend or profit share of the minority interest as well as the acquirer's equity ownership share;
    8. the extent, if any, of the acquirer's influence over the selection of management or of members of key board committees;
    9. board committee composition and meeting quorum, committee leadership, attendance and historical voting patterns;
    10. the status, expertise, and qualifications of the acquirer and the members it nominates to the target business’ board relative to those of other shareholders;
    11. the services (management, advisory or other) the acquirer is providing to the business, and vice versa, if any;
    12. the put, call or other liquidity rights, if any, that the acquirer has and may use to influence other shareholders or management;
    13. the access the acquirer has, if any, to confidential information about the business, and vice versa; and
    14. the practical extent to which the acquirer can otherwise impose pressure on the business's decision-making processes.
  3. It is generally the combination of factors — not the presence or absence of a single factor — that is determinative in our analysis of material influence.

Acquisitions of shares or other interests

  1. In the case of voting shares, we consider that a significant interest in a corporation exists when one or more persons directly or indirectly hold enough voting shares to:
    1. obtain enough representation on the board of directors to materially influence that board, considering the factors outlined in paragraph 292 and any other relevant factors; or
    2. block special or ordinary resolutions of the corporation.
  2. We will also consider whether voting shares give the person or persons who hold them the ability to exercise material influence in other ways, or the incentive to materially change their own competitive behaviour, with reference to the factors outlined in paragraph 292 and any other relevant factors. In the absence of other relationships, direct or indirect ownership of less than 10 percent of the voting interests in a business does not generally constitute ownership of a significant interest.Footnote 131 While inferences about situations that result in a direct or indirect holding of between 10 percent and 50 percent of voting interests are more difficult to draw, a larger voting interest is ordinarily required to materially influence a private company than a widely held public company. The merger notification requirements in Part IX of the Act, referred to above, are triggered at a voting interest of more than 35 percent for private corporations and of more than 20 percent for public corporations. For an entity other than a corporation, notification is required at an interest that would entitle the acquirer to receive more than 35 percent of the profits or assets of the entity on dissolution.
  3. When a transaction involves the purchase of non-voting shares,Footnote 132 we examine whether the holder of the minority interest can materially influence the economic behaviour of the business, and whether the interest provides an incentive for the holder to materially change its own competitive behaviour, with reference to the factors outlined in paragraph 292 and any other relevant factors.
  4. In the case of convertible securities or options, a significant interest may be acquired or established when these securities are first purchased or created, or at the time they are converted or exercised.Footnote 133 To determine whether a purchase constitutes a significant interest, we examine the nature of and circumstances in which the rights (or potential rights) attached to these securities may be exercised, and the influence or incentives that the acquirer may possess through their exercise, or threat of exercise, with reference to the factors outlined in paragraph 292 and any other relevant factors.

Increasing an existing interest in a business

  1. Even if someone already holds a significant interest in all or part of a business, we may consider the acquisition or establishment of a materially greater interest to be a merger. Part IX of the Act includes merger notification requirements for some situations where an acquirer increases their existing interest in a business by purchasing additional shares or interests.

Interlocking directorates

  1. An “interlocking directorate” may arise where a director of one firm is an employee, executive, partner, owner or member of the board of directors of a second firm, or has another interest in the business of the second firm. An interlocking directorate is generally of interest under section 92 of the Act only when the interlocked firms are competitors, are vertically related, or produce complementary or related products.
  2. Interlocking directorates may be features of transactions that otherwise qualify as mergers. For example, an interlock results from the merger of firms A and B when an executive of A sits on the board of firm C, and C competes with B. Interlocking directorates may be features of minority interest transactions; for example, a firm that acquires a minority interest in its competitor may also obtain rights to nominate one or more directors to its competitor's board. An interlocking directorate would rarely qualify, in and of itself, as a significant interest.
  3. When assessing whether an interlocked director has the ability to materially influence the economic behaviour of the interlocked firm(s), our focus is typically on the following factors:
    1. the relationship between the interlocked firms;
    2. the role and duty of the interlocked director toward the interlocked firms;
    3. the board composition, quorum and voting rules, including attendance and historical voting patterns;
    4. the position of the interlocked director on the boards;
    5. the information to which the interlocked director has access;
    6. any special powers of the interlocked director, including voting or veto rights; and
    7. any contractual or practical mechanisms that the interlocked director might use to influence firm policies or decision-making.

6 Appendix B: The merger provisions of the Act

Definition of merger

91 In sections 92 to 100, merger means the acquisition or establishment, direct or indirect, by one or more persons, whether by purchase or lease of shares or assets, by amalgamation or by combination or otherwise, of control over or significant interest in the whole or a part of a business of a competitor, supplier, customer or other person.

Order

92 (1) Where, on application by the Commissioner, the Tribunal finds that a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially

  1. in a trade, industry or profession,
  2. among the sources from which a trade, industry or profession obtains a product, including labour,
  3. among the outlets through which a trade, industry or profession disposes of a product, including labour, or
  4. otherwise than as described in paragraphs (a) to (c),

the Tribunal may, subject to sections 94 and 95,

  1. in the case of a completed merger, in order to restore competition to the level that would have prevailed but for the merger, order any party to the merger or any other person
    1. to dissolve the merger in such manner as the Tribunal directs,
    2. to dispose of assets or shares designated by the Tribunal in such manner as the Tribunal directs, or
    3. in addition to or in lieu of the action referred to in subparagraph (i) or (ii), with the consent of the person against whom the order is directed and the Commissioner, to take any other action, or
  2. in the case of a proposed merger, in order to preserve the level of competition that would prevail but for the merger, make an order directed against any party to the proposed merger or any other person
    1. ordering the person against whom the order is directed not to proceed with the merger,
    2. ordering the person against whom the order is directed not to proceed with a part of the merger, or
    3. in addition to or in lieu of the order referred to in subparagraph (ii), either or both
      1. prohibiting the person against whom the order is directed, should the merger or part thereof be completed, from doing any act or thing the prohibition of which the Tribunal determines to be necessary to ensure that the merger or part thereof does not prevent or lessen competition, or
      2. with the consent of the person against whom the order is directed and the Commissioner, ordering the person to take any other action.

Evidence

(2) For the purpose of this section, if the Tribunal finds, on a balance of probabilities, that a merger or proposed merger results or is likely to result in a significant increase in concentration or market share, the Tribunal shall also find that the merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially, unless the contrary is proved on a balance of probabilities by the parties to the merger or proposed merger.

Significant increase in concentration or market share

(3) A merger or proposed merger results or is likely to result in a significant increase in concentration or market share if, in any relevant market, as a result of the merger or proposed merger,

  1. the concentration index increases or is likely to increase by more than 100; and
  2. either
    1. the concentration index is or is likely to be more than 1,800, or
    2. the market share of the parties to the merger or proposed merger is or is likely to be more than 30%.

Definition of concentration index

(4) In subsection (3), concentration index means, in any relevant market, the sum of the squares of the market shares of the suppliers or customers.

Regulations — different values

(5) The Governor in Council may by regulation prescribe different values than those provided in subsection (3).

Factors to be considered regarding prevention or lessening of competition

93 In determining, for the purpose of section 92, whether or not a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially, the Tribunal may have regard to the following factors:

  1. the extent to which foreign products or foreign competitors provide or are likely to provide effective competition to the businesses of the parties to the merger or proposed merger;
  2. whether the business, or a part of the business, of a party to the merger or proposed merger has failed or is likely to fail;
  3. the extent to which acceptable substitutes for products supplied by the parties to the merger or proposed merger are or are likely to be available;
  4. any barriers to entry into a market, including
    1. tariff and non-tariff barriers to international trade,
    2. interprovincial barriers to trade, and
    3. regulatory control over entry,

and any effect of the merger or proposed merger on such barriers;

  1. the extent to which effective competition remains or would remain in a market that is or would be affected by the merger or proposed merger;
  2. any likelihood that the merger or proposed merger will or would result in the removal of a vigorous and effective competitor;
  3. the nature and extent of change and innovation in a relevant market;
    1. (g.1) network effects within a market;
    2. (g.2) whether the merger or proposed merger would contribute to the entrenchment of the market position of leading incumbents;
    3. (g.3) any effect of the merger or proposed merger on price or non-price competition, including quality, choice or consumer privacy;
    4. (g.4) the change in concentration or market share that the merger or proposed merger has brought about or is likely to bring about;
    5. (g.5) any likelihood that the merger or proposed merger will or would result in express or tacit coordination between competitors in a market; and
  4. any other factor that is relevant to competition in a market that is or would be affected by the merger or proposed merger.

Exception

94 The Tribunal shall not make an order under section 92 in respect of

  1. a merger substantially completed before the coming into force of this section;
  2. a merger or proposed merger under the Bank Act, the Cooperative Credit Associations Act, the Insurance Companies Act or the Trust and Loan Companies Act in respect of which the Minister of Finance has certified to the Commissioner the names of the parties and that the merger is in the public interest — or that it would be in the public interest, taking into account any terms and conditions that may be imposed under those Acts;
  3. a merger or proposed merger approved under subsection 53.2(7) of the Canada Transportation Act and in respect of which the Minister of Transport has certified to the Commissioner the names of the parties; or
  4. a merger or proposed merger that constitutes an existing or proposed arrangement, as defined in section 53.7 of the Canada Transportation Act, that has been authorized by the Minister of Transport under subsection 53.73(8) of that Act and for which the authorization has not been revoked.

Exception for joint ventures

95 (1) The Tribunal shall not make an order under section 92 in respect of a combination formed or proposed to be formed, otherwise than through a corporation, to undertake a specific project or a program of research and development if

  1. a project or program of that nature
    1. would not have taken place or be likely to take place in the absence of the combination, or
    2. would not reasonably have taken place or reasonably be likely to take place in the absence of the combination because of the risks involved in relation to the project or program and the business to which it relates;
  2. no change in control over any party to the combination resulted or would result from the combination;
  3. all the persons who formed the combination are parties to an agreement in writing that imposes on one or more of them an obligation to contribute assets and governs a continuing relationship between those parties;
  4. the agreement referred to in paragraph (c) restricts the range of activities that may be carried on pursuant to the combination, and provides that the agreement terminates on the completion of the project or program; and
  5. the combination does not prevent or lessen or is not likely to prevent or lessen competition except to the extent reasonably required to undertake and complete the project or program.

Limitation

(2) For greater certainty, this section does not apply in respect of the acquisition of assets of a combination.

Limitation period

97 No application may be made under section 92,

  1. in respect of a merger that was the subject of a request for a certificate under section 102 or a notification under section 114, more than one year after the merger has been substantially completed; or
  2. in respect of any other merger, more than three years after the merger has been substantially completed.

Where proceedings commenced under section 45, 49, 79 or 90.1

98 No application may be made under section 92 against a person on the basis of facts that are the same or substantially the same as the facts on the basis of which

  1. proceedings have been commenced against that person under section 45 or 49; or
  2. an order against that person has been made under section 79 or 90.1.

Conditional orders directing dissolution of a merger

99 (1) The Tribunal may provide, in an order made under section 92 directing a person to dissolve a merger or to dispose of assets or shares, that the order may be rescinded or varied if, within a reasonable period of time specified in the order,

  1. there has occurred
    1. a reduction, removal or remission, specified in the order, of any relevant customs duties, or
    2. a reduction or removal, specified in the order, of prohibitions, controls or regulations imposed by or pursuant to any Act of Parliament on the importation into Canada of an article specified in the order, or
  2. that person or any other person has taken any action specified in the order that will, in the opinion of the Tribunal, prevent the merger from preventing or lessening competition substantially.

When conditional order may be rescinded or varied

(2) Where, on application by any person against whom an order under section 92 is directed, the Tribunal is satisfied that

  1. a reduction, removal or remission specified in the order pursuant to paragraph (1)(a) has occurred, or
  2. the action specified in the order pursuant to paragraph (1)(b) has been taken,

the Tribunal may rescind or vary the order accordingly.

Interim order where no application under section 92

100 (1) The Tribunal may issue an interim order forbidding any person named in the application from doing any act or thing that it appears to the Tribunal may constitute or be directed toward the completion or implementation of a proposed merger in respect of which an application has not been made under section 92 or previously under this section, where

  1. on application by the Commissioner, certifying that an inquiry is being made under paragraph 10(1)(b) and that, in the Commissioner’s opinion, more time is required to complete the inquiry, the Tribunal finds that in the absence of an interim order a party to the proposed merger or any other person is likely to take an action that would substantially impair the ability of the Tribunal to remedy the effect of the proposed merger on competition under that section because that action would be difficult to reverse; or
  2. the Tribunal finds, on application by the Commissioner, that the completion of the proposed merger would result in a contravention of section 114.

Notice of application

(2) Subject to subsection (3), at least forty-eight hours notice of an application for an interim order under subsection (1) shall be given by or on behalf of the Commissioner to each person against whom the order is sought.

Ex parte application

(3) Where the Tribunal is satisfied, in respect of an application for an interim order under paragraph (1)(b), that

  1. subsection (2) cannot reasonably be complied with, or
  2. the urgency of the situation is such that service of notice in accordance with subsection (2) would not be in the public interest,

it may proceed with the application ex parte.

Effect of application for interim order

(3.1) If an application for an interim order is made under subsection (1) in respect of a proposed merger, the merger shall not be completed until the application has been disposed of by the Tribunal.

Terms of interim order

(4) An interim order issued under subsection (1)

  1. shall be on such terms as the Tribunal considers necessary and sufficient to meet the circumstances of the case; and
  2. subject to subsections (5) and (6), shall have effect for such period of time as is specified in it.

Duration of order: inquiry

(5) The duration of an interim order issued under paragraph (1)(a) shall not exceed thirty days.

Duration of order: failure to comply

(6) The duration of an interim order issued under paragraph (1)(b) shall not exceed

  1. ten days after section 114 is complied with, in the case of an interim order issued on ex parte application; or
  2. thirty days after section 114 is complied with, in any other case.

Extension of time

(7) Where the Tribunal finds, on application made by the Commissioner on forty-eight hours notice to each person to whom an interim order is directed, that the Commissioner is unable to complete an inquiry within the period specified in the order because of circumstances beyond the control of the Commissioner, the Tribunal may extend the duration of the order to a day not more than sixty days after the order takes effect.

Completion of inquiry

(8) Where an interim order is issued under paragraph (1)(a), the Commissioner shall proceed as expeditiously as possible to complete the inquiry under section 10 in respect of the proposed merger.

Right of intervention

101 The attorney general of a province may intervene in any proceedings before the Tribunal under section 92 for the purpose of making representations on behalf of the province.

Advance ruling certificates

102 (1) Where the Commissioner is satisfied by a party or parties to a proposed transaction that he would not have sufficient grounds on which to apply to the Tribunal under section 92, the Commissioner may issue a certificate to the effect that he is so satisfied.

Duty of Commissioner

(2) The Commissioner shall consider any request for a certificate under this section as expeditiously as possible.

No application under section 92

103 Where the Commissioner issues a certificate under section 102, the Commissioner shall not, if the transaction to which the certificate relates is substantially completed within one year after the certificate is issued, apply to the Tribunal under section 92 in respect of the transaction solely on the basis of information that is the same or substantially the same as the information on the basis of which the certificate was issued.

Définition de fusionnement

91 Pour l’application des articles 92 à 100, fusionnement désigne l’acquisition ou l’établissement, par une ou plusieurs personnes, directement ou indirectement, soit par achat ou location d’actions ou d’éléments d’actif, soit par fusion, association d’intérêts ou autrement, du contrôle sur la totalité ou quelque partie d’une entreprise d’un concurrent, d’un fournisseur, d’un client, ou d’une autre personne, ou encore d’un intérêt relativement important dans la totalité ou quelque partie d’une telle entreprise.

Ordonnance en cas de diminution de la concurrence

92 (1) Dans les cas où, à la suite d’une demande du commissaire, le Tribunal conclut qu’un fusionnement réalisé ou proposé empêche ou diminue sensiblement la concurrence, ou aura vraisemblablement cet effet :

  1. dans un commerce, une industrie ou une profession;
  2. entre les sources d’approvisionnement auprès desquelles un commerce, une industrie ou une profession se procure un produit, notamment du personnel;
  3. entre les débouchés par l’intermédiaire desquels un commerce, une industrie ou une profession écoule un produit, notamment du personnel;
  4. autrement que selon ce qui est prévu aux alinéas a) à c),

le Tribunal peut, sous réserve des articles 94 et 95 :

  1. dans le cas d’un fusionnement réalisé, afin de rétablir la concurrence au niveau qui aurait existé sans le fusionnement, rendre une ordonnance enjoignant à toute personne, que celle-ci soit partie au fusionnement ou non :
    1. de le dissoudre, conformément à ses directives,
    2. de se départir, selon les modalités qu’il indique, des éléments d’actif et des actions qu’il indique,
    3. en sus ou au lieu des mesures prévues au sous-alinéa (i) ou (ii), de prendre toute autre mesure, à condition que la personne contre qui l’ordonnance est rendue et le commissaire souscrivent à cette mesure;
  2. dans le cas d’un fusionnement proposé, afin de préserver le niveau de concurrence qui existerait sans le fusionnement, rendre, contre toute personne, que celle-ci soit partie au fusionnement proposé ou non, une ordonnance enjoignant :
    1. à la personne contre laquelle l’ordonnance est rendue de ne pas procéder au fusionnement,
    2. à la personne contre laquelle l’ordonnance est rendue de ne pas procéder à une partie du fusionnement,
    3. en sus ou au lieu de l’ordonnance prévue au sous-alinéa (ii), cumulativement ou non :
      1. à la personne qui fait l’objet de l’ordonnance, de s’abstenir, si le fusionnement était éventuellement complété en tout ou en partie, de faire quoi que ce soit dont l’interdiction est, selon ce que conclut le Tribunal, nécessaire pour que le fusionnement, même partiel, n’empêche ni ne diminue la concurrence,
      2. à la personne qui fait l’objet de l’ordonnance de prendre toute autre mesure à condition que le commissaire et cette personne y souscrivent.

Preuve

(2) Pour l’application du présent article, lorsque le Tribunal conclut, selon la prépondérance des probabilités, qu’un fusionnement réalisé ou proposé entraîne ou entraînera vraisemblablement une augmentation importante de la concentration ou de la part du marché, il conclut également que le fusionnement réalisé ou proposé empêche ou diminue sensiblement la concurrence, ou aura vraisemblablement cet effet, sauf preuve contraire, selon la prépondérance des probabilités, par les parties au fusionnement réalisé ou proposé.

Augmentation importante — concentration ou part du marché

(3) Le fusionnement réalisé ou proposé entraîne ou entraînera vraisemblablement une augmentation importante de la concentration ou de la part du marché si, dans tout marché pertinent, en raison du fusionnement réalisé ou proposé, à la fois :

  1. l’indice de concentration augmente ou augmentera vraisemblablement de plus de 100;
  2. l’indice de concentration est ou sera vraisemblablement supérieur à 1 800, ou la part du marché des parties au fusionnement réalisé ou proposé est ou sera vraisemblablement supérieure à 30 %.

Définition de indice de concentration

(4) Au paragraphe (3), indice de concentration correspond, dans tout marché pertinent, à la somme des carrés des parts du marché des fournisseurs ou des clients.

Règlements — valeurs différentes

(5) Le gouverneur en conseil peut, par règlement, établir des valeurs différentes de celles que prévoit le paragraphe (3).

Éléments à considérer

93 Lorsqu’il détermine, pour l’application de l’article 92, si un fusionnement, réalisé ou proposé, empêche ou diminue sensiblement la concurrence, ou s’il aura vraisemblablement cet effet, le Tribunal peut tenir compte des facteurs suivants :

  1. la mesure dans laquelle des produits ou des concurrents étrangers assurent ou assureront vraisemblablement une concurrence réelle aux entreprises des parties au fusionnement réalisé ou proposé;
  2. la déconfiture, ou la déconfiture vraisemblable de l’entreprise ou d’une partie de l’entreprise d’une partie au fusionnement réalisé ou proposé;
  3. la mesure dans laquelle sont ou seront vraisemblablement disponibles des produits pouvant servir de substituts acceptables à ceux fournis par les parties au fusionnement réalisé ou proposé;
  4. les entraves à l’accès à un marché, notamment :
    1. les barrières tarifaires et non tarifaires au commerce international,
    2. les barrières interprovinciales au commerce,
    3. la réglementation de cet accès,

et tous les effets du fusionnement, réalisé ou proposé, sur ces entraves;

  1. la mesure dans laquelle il y a ou il y aurait encore de la concurrence réelle dans un marché qui est ou serait touché par le fusionnement réalisé ou proposé;
  2. la possibilité que le fusionnement réalisé ou proposé entraîne ou puisse entraîner la disparition d’un concurrent dynamique et efficace;
  3. la nature et la portée des changements et des innovations sur un marché pertinent;
    1. g.1) les effets de réseau dans un marché;
    2. g.2) le fait que le fusionnement réalisé ou proposé contribuerait au renforcement de la position sur le marché des principales entreprises en place;
    3. g.3) tout effet du fusionnement réalisé ou proposé sur la concurrence hors prix ou par les prix, notamment la qualité, le choix ou la vie privée des consommateurs;
    4. g.4) la variation de la concentration ou des parts de marché entraînée ou vraisemblablement entraînée par le fusionnement réalisé ou proposé;
    5. g.5) la possibilité que le fusionnement réalisé ou proposé entraîne ou puisse entraîner une coordination expresse ou tacite entre les concurrents dans un marché;
  4. tout autre facteur pertinent à la concurrence dans un marché qui est ou serait touché par le fusionnement réalisé ou proposé.

Exception

94 Le Tribunal ne rend pas une ordonnance en vertu de l’article 92 à l’égard :

  1. d’un fusionnement en substance réalisé avant l’entrée en vigueur du présent article;
  2. d’une fusion réalisée ou proposée aux termes de la Loi sur les banques, de la Loi sur les associations coopératives de crédit, de la Loi sur les sociétés d’assurances ou de la Loi sur les sociétés de fiducie et de prêt, et à propos de laquelle le ministre des Finances certifie au commissaire le nom des parties et certifie que cette fusion est dans l’intérêt public ou qu’elle le serait compte tenu des conditions qui pourraient être imposées dans le cadre de ces lois;
  3. d’une fusion — réalisée ou proposée — agréée en vertu du paragraphe 53.2(7) de la Loi sur les transports au Canada et à l’égard de laquelle le ministre des Transports certifie au commissaire le nom des parties;
  4. d’une fusion — réalisée ou proposée — constituant une entente, au sens de l’article 53.7 de la Loi sur les transports au Canada, autorisée par le ministre des Transports en application du paragraphe 53.73(8) de cette loi, dans la mesure où l’autorisation n’a pas été révoquée.

Exceptions pour les entreprises à risques partagés

95 (1) Le Tribunal ne rend pas d’ordonnance en application de l’article 92 à l’égard d’une association d’intérêts formée, ou dont la formation est proposée, autrement que par l’intermédiaire d’une personne morale, dans le but d’entreprendre un projet spécifique ou un programme de recherche et développement si les conditions suivantes sont réunies :

  1. un projet ou programme de cette nature :
    1. soit n’aurait pas eu lieu ou n’aurait vraisemblablement pas lieu sans l’association d’intérêts,
    2. soit n’aurait, en toute raison, pas eu lieu ou n’aurait vraisemblablement pas lieu sans l’association d’intérêts en raison des risques attachés à ce projet ou programme et de l’entreprise qu’il concerne;
  2. aucun changement dans le contrôle d’une des parties à l’association d’intérêts n’a résulté ou ne résulterait de cette association;
  3. toutes les parties qui ont formé l’association d’intérêts sont parties à une entente écrite qui impose à au moins l’une d’entre elles l’obligation de contribuer des éléments d’actif et qui régit une relation continue entre ces parties;
  4. l’entente visée à l’alinéa c) limite l’éventail des activités qui peuvent être exercées conformément à l’association d’intérêts et prévoit sa propre expiration au terme du projet ou programme;
  5. l’association d’intérêts n’a pas, sauf dans la mesure de ce qui est raisonnablement nécessaire pour que le projet ou programme soit entrepris et complété, l’effet d’empêcher ou de diminuer la concurrence ou n’aura vraisemblablement pas cet effet.

Restriction

(2) Il est entendu que le présent article ne s’applique pas à l’égard de l’acquisition d’éléments d’actif d’une association d’intérêts.

Prescription

97 Aucune demande ne peut être présentée au titre de l’article 92 à l’égard d’un fusionnement visé par la demande de certificat prévue à l’article 102 ou par l’avis donné en vertu de l’article 114 qui est en substance réalisé depuis plus d’un an, ni à l’égard de tout autre fusionnement qui est en substance réalisé depuis plus de trois ans.

Procédures en vertu des articles 45, 49, 79 ou 90.1

98 Aucune demande à l’endroit d’une personne ne peut être présentée au titre de l’article 92 si les faits au soutien de la demande sont les mêmes ou essentiellement les mêmes que ceux qui ont été allégués au soutien :

  1. d’une procédure engagée à l’endroit de cette personne en vertu des articles 45 ou 49;
  2. d’une ordonnance rendue contre cette personne en vertu des articles 79 ou 90.1.

99 (1) Le Tribunal peut déclarer, dans une ordonnance rendue en vertu de l’article 92 et enjoignant à une personne de dissoudre un fusionnement ou de se départir d’éléments d’actif ou d’actions, que l’ordonnance peut être annulée ou modifiée si, dans le délai raisonnable qui y est fixé :

  1. soit il y a eu :
    1. ou bien réduction, suppression ou remise, indiquée dans l’ordonnance, de droits de douane pertinents,
    2. ou bien réduction ou suppression, indiquée dans l’ordonnance, d’interdictions, de contrôles ou de réglementations imposés aux termes ou en vertu d’une loi fédérale et visant l’importation au Canada d’un article mentionné dans l’ordonnance;
  2. soit la personne en question ou une autre personne a pris toute mesure indiquée à l’ordonnance,

et, qu’en conséquence, selon le Tribunal, le fusionnement n’aura pas pour effet d’empêcher ou de diminuer sensiblement la concurrence.

Annulation ou modification de l’ordonnance

(2) À la demande d’une personne contre qui une ordonnance a été rendue aux termes de l’article 92, le Tribunal peut annuler ou modifier l’ordonnance en question s’il est convaincu que :

  1. la réduction, la suppression ou la remise prévue à l’ordonnance conformément à l’alinéa (1)a) a eu lieu;
  2. les mesures prévues à l’ordonnance conformément à l’alinéa (1)b) ont été exécutées.

Ordonnance provisoire en l’absence d’une demande en vertu de l’article 92

100 (1) Le Tribunal peut rendre une ordonnance provisoire interdisant à toute personne nommée dans la demande de poser tout geste qui, de l’avis du Tribunal, pourrait constituer la réalisation ou la mise en oeuvre du fusionnement proposé, ou y tendre, relativement auquel il n’y a pas eu de demande aux termes de l’article 92 ou antérieurement aux termes du présent article, si :

  1. à la demande du commissaire comportant une attestation de la tenue de l’enquête prévue à l’alinéa 10(1)b) et de la nécessité, selon celui-ci, d’un délai supplémentaire pour l’achever, il conclut qu’une personne, partie ou non au fusionnement proposé, posera vraisemblablement, en l’absence d’une ordonnance provisoire, des gestes qui, parce qu’ils seraient alors difficiles à contrer, auraient pour effet de réduire sensiblement l’aptitude du Tribunal à remédier à l’influence du fusionnement proposé sur la concurrence, si celui-ci devait éventuellement appliquer cet article à l’égard de ce fusionnement;
  2. à la demande du commissaire, il conclut que la réalisation du fusionnement proposé serait une contravention de l’article 114.

Avis

(2) Sous réserve du paragraphe (3), le commissaire, ou une personne agissant au nom de celui-ci, donne à chaque personne à l’égard de laquelle il entend demander une ordonnance provisoire aux termes du paragraphe (1) un avis d’au moins quarante-huit heures relativement à cette demande.

Audition ex parte

(3) Si, lors d’une demande d’ordonnance provisoire présentée en vertu de l’alinéa (1)b), le Tribunal est convaincu :

  1. qu’en toute raison, le paragraphe (2) ne peut pas être observé;
  2. que la situation est à ce point urgente que la signification de l’avis aux termes du paragraphe (2) ne servirait pas l’intérêt public,

il peut entendre la demande ex parte.

Effet d’une demande d’ordonnance provisoire

(3.1) Lorsqu’une demande d’ordonnance provisoire est présentée au titre du paragraphe (1) à l’égard d’un fusionnement proposé, le fusionnement ne peut être réalisé tant que le Tribunal n’a pas statué sur la demande.

Conditions d’une ordonnance provisoire

(4) Une ordonnance provisoire rendue aux termes du paragraphe (1) :

  1. prévoit ce qui, de l’avis du Tribunal, est nécessaire et suffisant pour parer aux circonstances de l’affaire;
  2. sous réserve des paragraphes (5) et (6), a effet pour la période qui y est spécifiée.

Durée maximale de l’ordonnance provisoire

(5) La durée d’une ordonnance provisoire rendue en application de l’alinéa (1)a) ne peut dépasser trente jours.

Durée maximale de l’ordonnance provisoire

(6) La durée d’une ordonnance provisoire rendue en application de l’alinéa(1)b) ne peut dépasser :

  1. dans le cas d’une ordonnance provisoire rendue dans le cadre d’une demande ex parte, dix jours à compter du moment où les exigences de l’article 114 ont été respectées;
  2. dans les autres cas, trente jours à compter du moment où les exigences de l’article 114 ont été respectées.

Prorogation du délai

(7) Lorsque le Tribunal conclut, sur demande présentée par le commissaire après avoir donné un avis de quarante-huit heures à chaque personne visée par l’ordonnance provisoire, que celui-ci est incapable, à cause de circonstances indépendantes de sa volonté, d’achever une enquête dans le délai prévu par l’ordonnance, il peut la proroger; la durée d’application maximale de l’ordonnance ainsi prorogée est de soixante jours à compter de sa prise d’effet.

Achèvement de l’enquête

(8) Dans le cas où une ordonnance provisoire est rendue en vertu de l’alinéa (1)a), le commissaire est tenu d’achever l’enquête prévue à l’article 10 avec toute la diligence possible.

Intervention

101 Le procureur général d’une province peut intervenir dans les procédures qui se déroulent devant le Tribunal en application de l’article 92 afin d’y faire des représentations pour le compte de la province.

Certificats de décision préalable

102 (1) Lorsqu’une ou plusieurs parties à une transaction proposée convainquent le commissaire qu’il n’aura pas de motifs suffisants pour faire une demande au Tribunal en vertu de l’article 92, le commissaire peut délivrer un certificat attestant cette conviction.

Obligation du commissaire

(2) Le commissaire examine les demandes de certificats en application du présent article avec toute la diligence possible.

Nulle présentation de demande en vertu de l’article 92

103 Après la délivrance du certificat visé à l’article 102, le commissaire ne peut, si la transaction à laquelle se rapporte le certificat est en substance complétée dans l’année suivant la délivrance du certificat, faire une demande au Tribunal en application de l’article 92 à l’égard de la transaction lorsque la demande est exclusivement fondée sur les mêmes ou en substance les mêmes renseignements que ceux qui ont justifié la délivrance du certificat.

How to contact the Competition Bureau

Anyone wishing to obtain additional information about the Competition Act, the Consumer Packaging and Labelling Act (except as it relates to food), the Textile Labelling Act, the Precious Metals Marking Act or the program of written opinions, or to file a complaint under any of these acts should contact the Competition Bureau’s Information Centre:

Website

www.competitionbureau.gc.ca

Address

Information Centre
Competition Bureau
50 Victoria Street
Gatineau, Quebec
K1A 0C9

Telephone

Toll free: 1-800-348-5358
National Capital Region: 819-997-4282
TTY (for hearing impaired) 1-866-694-8389

Facsimile

819-997-0324

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